Results Now for Nonprofits: Strategic, Operating, and Governance Planning

Chapter = FTOC

Date: Dec 7, 2010

Time: 7:21 pm

Chapter = FFIRS

Date: Dec 8, 2010

Time: 1:42 pm

Results Now for Nonprofits

Chapter = FFIRS

Date: Dec 8, 2010

Time: 1:42 pm

Chapter = FFIRS

Date: Dec 8, 2010

Time: 1:42 pm

Results Now for Nonprofits Purpose, Strategy, Operations, and Governance

MARK LIGHT

John Wiley & Sons, Inc.

Chapter = FFIRS

Date: Dec 8, 2010

Time: 1:42 pm

Copyright ©2011 by John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Light, Mark. Results now for nonprofits : purpose, strategy, operations, and governance / Mark Light. p. cm. Includes bibliographical references and index. ISBN 978-0-471-75824-2 1. Nonprofit organizations—Management. 2. Strategic management. I. Title. HD62.6.L537 2010 658.4 012—dc22 2010032748 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

Chapter = FTOC

Date: Dec 7, 2010

Time: 7:21 pm

Contents

ix

Preface Acknowledgments

xiii

PART I

SETTING THE FRAME

1

CHAPTER 1

The Four Pillars of High Performance

3

Defining High Performance The Third Envelope

3 8

Planning Rules

13

Just Say No Just Say Yes Show Me the Money Bottom Lines

14 19 23 25

All Together

29

Master Plan Be Quick

30 32

PART II

PURPOSE

37

CHAPTER 4

Values

39

Getting Real Talk that Walks

40 42

CHAPTER 2

CHAPTER 3

v

Chapter = FTOC

Date: Dec 7, 2010

Time: 7:21 pm

vi

Contents

Mission

47

Customers Difference Advantage Sweet Spot Hoop Dreams

49 51 53 57 60

PART III

STRATEGY

63

CHAPTER 6

Lines of Business

67

Front Lines Means and Ends Making Lines of Business

68 70 71

Success Measures

73

Measuring the Unmeasurable Why Measure? Making Success Measures

73 74 78

Vision Statement

83

Vision Types Making Statements

83 87

CHAPTER 5

CHAPTER 7

CHAPTER 8

Vision Strategies

103

Making Strategies

103

PART IV

OPERATIONS

119

CHAPTER 10

Goals

123

Making Goals

124

CHAPTER 11

Budget

133

PART V

GOVERNANCE

137

Seven Realities

141

CHAPTER 9

Chapter = FTOC

Date: Dec 7, 2010

Time: 7:21 pm

vii

Contents

Delegation

149

Levers Duties Guidelines

150 158 172

Accountability

181

Agendas Assessments

183 187

Smart Board

195

Help Me Help You Adding Value

196 199

APPENDIX A

BAM

207

APPENDIX B

First Cut

211

APPENDIX C

Final Answers

227

APPENDIX D

Board Meeting Advance Information Template

239

CHAPTER 12

CHAPTER 13

CHAPTER 14

Notes

247

About the Author

275

Index

277

Chapter = FTOC

Date: Dec 7, 2010

Time: 7:21 pm

Chapter = FPREF

Date: Dec 13, 2010

Time: 11:36 am

Preface

The main thing is to make sure that the main thing is still the main thing. —James Barksdale

esults Now® is the quick and practical process for purpose, strategy, operations, and governance. Put simply, Results Now builds capacity, which the Alliance for Nonprofit Management defines as the organization’s ability “to achieve its mission effectively and to sustain itself over the long term.”1 Capacity building can be a challenge given the seven realities of nonprofit leadership. Board members are part-timers with limited time, which can lead to imperfect knowledge for evidence-based decision making. The size and composition of the board often has more to do with “affluence and influence” than governance, but board members’ fund ability to give or get revenue is limited. Term limits and short officer tenures work against continuity meeting to meeting and year to year. The seventh reality is executive director inexperience. Not all organizations experience these realities, but it’s a rare one that doesn’t encounter a handful at the same time. Results Now addresses these difficulties by beginning with the belief that leadership should focus its energy on making sure that the job gets done, that the organization brings its purpose to life. For an organization using Results Now, the right answers come from the right questions:

R

■ ■ ■ ■ ■

Why? Where to go tomorrow? What gets done today? Who does what? When did it happen?

To address these questions, Results Now creates a unified frame—a master plan—to guide the work of the organization. Most methods focus ix

Chapter = FPREF

x

Date: Dec 13, 2010

Time: 11:36 am

Preface

only on strategy; purpose, operations, and governance are ignored, but Results Now is different. It puts purpose, strategy, operations, and governance into a master plan that the board can pass in a single vote and the organization maintains as a regular part of its yearly work. Noted expert Henry Mintzberg advises, “All viable strategies have emergent and deliberate qualities.”2 Thus, the trick is to find a process that offers enough structure to be valuable, but not so much that the organization loses its adaptability. This is especially important because almost all nonprofits are smaller in size; four in five have expenses of less than $1 million.3 As such, formalized plans are not only time consuming (and often expensive) to make, but are often very difficult to use in practice. Though you want the wind in your sails from purpose, strategy, operations, and governance, you don’t want an anchor. Results Now strikes the right balance. Results Now can deliver many benefits, including fostering a welcome climate for give-and-take strategic thinking instead of the usual show-andtell monotony of rubber-stamping. Results Now can clarify the organization’s story for the community and keep people on point about what’s important. It can build team cohesion, orienting newer people and recharging seasoned ones. Making Results Now worth its weight in gold is the evidence that funders reward those who plan.4 Relying on the rule of “What you measure is what you get,” Results Now has a strong bias for accountability in general and performance measurement in particular, which increases the level of “effectiveness in strategic decision making.”5 Because informed board members make better decisions, the master plan is often used as a centerpiece of the board meeting advance information sent a few days prior to meetings. In this way, the busy board members have everything they need at their fingertips, including the master plan; just toss it in your briefcase or backpack and read it when time permits. Unlike traditional methods, Results Now is an ongoing way of doing things, an essential part of day-to-day organizational life. First, the master plan is often made the centerpiece of an overall approach to board meeting advance information that puts everything in one document, including agenda, minutes, and the like. Second, the master plan is refreshed annually as a regular part of day-to-day operations; gone is the “strategic plan articulating where the company expects (or hopes or prays) to be in three, five, and ten years [that then sits] on executives’ bookshelves for the next 12 months.”6 Governance experts John and Miriam Carver argue that the job of leadership is to ensure that “the organization produces what it should . . . while avoiding situations and conduct that should not occur.”7 William Bowen, president emeritus of The Andrew W. Mellon Foundation, says, “Perhaps the overriding obligation . . . is to require that a sensible plan of some kind

Chapter = FPREF

Preface

Date: Dec 13, 2010

Time: 11:36 am

xi

be in place and that it be monitored carefully.”8 For the Carvers, accomplishing the mission is the end; for William Bowman, the plan is the means to that end. For organizations looking for a quick and practical way to do both, Results Now is the answer. This book is organized into five parts. The first part, Setting the Frame, makes the case for and introduces Results Now. The following four parts present the elements of the Results Now master plan: purpose, strategy, operations, and governance. The renowned quality expert Philip Crosby once said, “Good things only happen when planned; bad things happen on their own.”9 It is my hope that good things happen for you and your organization as a consequence of Results Now.

Chapter = FPREF

Date: Dec 13, 2010

Time: 11:36 am

Chapter = FLAST

Date: Dec 8, 2010

Time: 1:46 pm

Acknowledgments

If at first you do succeed—try to hide your astonishment. —Harry F. Banks

O

n summer vacation years ago, my then four-year-old son, David, and the rest of our family were walking along the Lake Michigan beach near Sleeping Bear National Seashore. David knew of my passion for collecting beach glass. Beach glass is the ultimate detritus of humanity. People carelessly toss their empty bottles into the water and the waves gradually break the glass into small pieces. And then something wonderful happens; over time the sharp edges are smoothed out and wonderful small treasures are created. Beach glass on Lake Michigan to the north is really quite rare, but wonder of wonders, David found a piece of opaque white glass almost two inches long. It was a marvelous find. As we walked along the beach, David would bury the piece of glass, walk a bit, and then go back to dig up his treasure. This act of rediscovery obviously delighted him, and it went on for quite some time. Then the inevitable came to pass and the glass was lost. As we dallied on the beach that beautiful August afternoon, I did my best to find that piece of beach glass. Back and forth, I walked along the stretch of sand my son had been playing on. To make my search more fruitful, I began praying. “Lord, please return my treasure to me. You made the Earth in just seven days, so this should be well within your powers.” Alas, my prayers went unanswered. As I walked along the beach for what would have been my final search, I begged one last time to get my treasure back. Suddenly out of nowhere, there was little David, looking up at me, reaching his hand into mine as only a small child can do, saying, “Here I am.” Such is the way of life. The riches we seek are momentary and shallow; the real treasure has been here all along in our relationships with those closest to us. That is why this book is dedicated to my wonderful family: my xiii

Chapter = FLAST

xiv

Date: Dec 8, 2010

Time: 1:46 pm

Acknowledgments

three boys—William, Michael, and David—and glorious Joni—soul mate, mother, and dear friend. Although acknowledgments should be bright, be brief, and be gone (the three Bs of presentations), I would be remiss if I didn’t thank my incredibly patient senior editor Susan McDermott at John Wiley & Sons, her steady colleague Judy Howarth, and the ever-calm senior production editor Stacey Fischkelta. I am also grateful to my colleagues at Antioch University including Laurien Alexander, Al Guskin, Jon Wergin, and Dick Couto. I am deeply indebted to Susan Eagan, former executive director at Case Western Reserve University’s Mandel Center for Nonprofit Organizations who took a chance on me by allowing me into the classroom. Relative to the Results Now model itself, I am grateful to Elaine Woloshyn at the Center for Nonprofit Excellence in Akron for early encouragement, and Ginny Strausburg of The Dayton Power and Light Company for recent support around earned income strategy. The students in my earned income classes at Case Western Reserve University’s Mandel Center for Nonprofit Organizations have also been enormously helpful in successfully testing the earned income side of the model with a wide variety of Cleveland-based nonprofits. Needless to say, there are countless others who have made a difference in this book for the better; that I do not acknowledge them by name does not lessen their contribution.

Chapter = c01

Date: Dec 7, 2010

Time: 8:21 am

PART

I

Setting the Frame The chief limitations of humanity are in its visions, not in its powers of achievement. —A. E. Morgan

L

eading nonprofits is hard work. It shows in the median executive director tenure of four years or less, the 65 percent who are first timers in the job, and the less than half who want to play the role again.1 Working in the sector is a mixed bag for executive directors who “enjoy their jobs as a means of addressing important community needs (mission) but don’t want to do it again because of the high stress involved (burnout).”2 The typical executive faces challenges of “high stress and long hours, anxiety about agency finances, fundraising, and managing people.”3 The chief executives of nonprofits—whether called chief executive officer (CEO), president, director, or the widely used executive director—confront “funding cuts, rising demands for performance measures by foundations, corporations that want strategic benefits from their philanthropy, new forms of competition from the business sector, and serious questions about the effectiveness and appropriateness of traditional charitable remedies for social problems.”4 Though many experts on nonprofit bemoan the state of the field,5 there is much to celebrate when it comes to leading nonprofits. Most executives take the job because of the “mission of their agencies as well as their own desire to help others and to give back to their communities.”6 As a result, almost all experience a high level of enjoyment in their work.7 Executive directors are not alone. Nonprofit employees are “highly motivated, hard working, and deeply committed [and are] motivated primarily by the chance to accomplish something worthwhile.”8 Perhaps this is why only 16 percent of the nonprofit workforce is motivated by the paycheck, compared to nearly half of those who work in the private sector.9

1

Chapter = c01

2

Date: Dec 7, 2010

Time: 8:21 am

Setting the Frame

To be sure, nonprofit executives have to make do with limited resources and many “small, community-based groups are organizationally fragile. Many large groups are stretched to their limits.”10 The good news here is that when it comes to working conditions, it’s better than the private sector or government.11 Compared to these other sectors, people who work in nonprofits were less likely than “federal or private-sector employees to say their work is boring and their jobs are a dead-end with no future, and were much more likely to say that they are given a chance to do the things they do best.”12 Parade’s annual report on what people make closes by saying, “in any economy, the best jobs provide emotional as well as financial rewards.”13 This statement reflects what workers in the nonprofit sector already know: almost all who work in the sector experience a high level of enjoyment in their work.14 Indeed, nonprofit workers may be living the dream job if a survey commissioned by Parade for its special issue gives voice to truth: the number-one attribute of a dream job was making a difference in people’s lives.15 If it is true that “in our hearts, we would all like to find a purpose bigger than ourselves,”16 where better to find it than the nonprofit sector? But what if that purpose is embedded in an organization; how do you bring it to life in that context? Results Now is one way to bring an organization’s purpose to life. Understanding this process begins with setting the frame. In the first chapter, you will learn about four pillars of high-performance and be introduced to the Results Now model. Chapter 2 makes the case for why you should embrace planning, but not get too carried away with it. Chapter 3 pulls everything together and introduces the Results Now master plan.

Chapter = c01

Date: Dec 7, 2010

Time: 5:56 pm

CHAPTER

1

The Four Pillars of High Performance It’s amazing what ordinary people can do if they set out without preconceived notions. —Charles F. Kettering

A

t a BoardSource conference some years ago, Vartan Gregorian, president of the Carnegie Corporation, told a story from when he was a dean about a board member at the University of Pennsylvania. The board member asked a question about student–faculty ratios. Dr. Gregorian replied with pride that there was a one-to-one ratio in the department of Siberian studies. Not surprisingly, this disturbed the board member very much because it seemed a wasteful use of resources. Dr. Gregorian immediately understood that the best student/faculty ratio for that individual was the 1-to-400 ratio in the Psychology 101 class. In other words, Dr. Gregorian and his board member had very different opinions about what high performance meant.

Defining High Performance As Dr. Gregorian’s experience with student/faculty ratios illustrates, helping your nonprofit become a high performer begins with being clear about what high performance means. For many of us, high performance is equivalent to effectiveness.1 And for the late, great Peter Drucker in the mid-1970s, the definition couldn’t have been any simpler, “Effectiveness is the foundation of success—efficiency is a minimum condition for survival after success has been achieved. Efficiency is concerned with doing things right. Effectiveness is doing the right things.”2 The Achilles’ heel was in knowing what things are 3

Chapter = c01

4

Date: Dec 7, 2010

Time: 5:56 pm

Setting the Frame

right to do. For a decade the debate raged, with expert Kim Cameron finally throwing in the towel by declaring that “agreement about effectiveness is mainly an agreement to disagree.”3 If you think that defining high performance in the nonprofit sector has been any easier, think again.4 A decade or so ago, Daniel Forbes reviewed empirical studies of nonprofit organizational effectiveness over a 20-year period and determined that high performance has “been a subject of controversy and confusion, and it is difficult to identify any signs of theoretical progress in our understanding of the concept.”5 Though there is a good deal of opinion about what constitutes nonprofit high performance, there isn’t much in the way of empirical research on the topic, and so we are often advised to look to the for-profit sector;6 eBay founder Pierre M. Omidyar, for example, wants “charities to run like businesses.”7 And why shouldn’t he? As Robert Herman and David Renz observe, “many ideas first instituted and popularized in business (such as strategic planning, visioning, total quality management, benchmarking, and others) are later adopted by NPOs.”8 Some of this for-profitizing of nonprofits may be due to the belief that there is little difference between one business and another. As Peter Drucker puts it, “Ninety percent or so of what each of these organizations is concerned with is generic. And the differences in respect to the last 10 percent are no greater between businesses and nonbusiness than they are between businesses in difference industries.”9 Although mice and humans share 99 percent of their genetic code10 (and we’re certainly not mice), maybe there really isn’t much difference between for-profit and nonprofit agencies. Assuming that the for-profit and nonprofit sectors mirror each other can be tempting, but it is faulty logic.11 First, “effectiveness measures applied in the private and public sectors are significantly different.”12 Second, we know that 64 percent of 1,072 respondents to a national study of nonprofit executive directors were outsiders when they took their positions,13 inverse to the 36 percent rate of outsiders in for-profit successions.14 Third, we know that “the centrality of mission for nonprofit organizations places limitations on their flexibility of action”15 compared to for-profits that can simply shut down or sell off a line of business or even the entire operation. It may be true that the “success rate for nonprofit enterprises is the same as small businesses: a large share fail. The difference is, with the social mission attached, it is harder for nonprofits to let go.”16 Perhaps this is why Robert Shriner argues that “running a non-profit is very much harder than operating a similar sized for-profit business.”17 So what do nonprofits use to gauge effectiveness? A great many things is the short answer. Daniel Forbes gives the long answer: goal attainment, system resource, reputational approach, multidimensional approach, and

Chapter = c01

Date: Dec 7, 2010

Time: 5:56 pm

The Four Pillars of High Performance

5

emergent approach. Goal attainment is the degree to which the organization achieves its goals; system resource measures how well you use resources; the reputational approach is based on how others see you. Multidimensional approaches “recognize that NPOs have multiple performance criteria (related to programs, finances, advocacy, etc.).”18 Emergent approaches are, well, emergent. Rather than try to make a case for one definition of high performance over another, Robert Herman and David Renz simply say that “NPOs have multiple performance criteria (related to programs, finances, advocacy, etc.), and these criteria often are independent of one another . . . assessments that focus on a single criterion (e.g., fund balance, a program outcome) are inadequate.”19 These two experts are among the more prolific advocates of the multiple constituencies approach to high performance wherein “an organization comprises multiple stakeholders or constituents who are likely to use different criteria to evaluate its effectiveness.”20 The argument here is that nonprofit executive directors should understand that “different constituencies are judging their organizations’ effectiveness in different ways and that they (the managers) should find out what criteria are important to the different constituencies and provide favorable information on how their organizations are doing on those criteria.”21 Remember the story told by Vartan Gregorian and his board member that began this chapter, the one where the board member valued larger class sizes and Gregorian thought smaller were better? This is how the multiple constituencies approach works. In 2004, Robert Herman and David Renz supported their position in a longitudinal study of 64 locally based, United Way-funded health and welfare organizations by saying “In short, we adopt the view that overall nonprofit organizational effectiveness is whatever multiple constituents or stakeholders judge it to be.”22 Early in 2005, they found an apt analogy to illustrate this method: One way we explain this notion is to share the story of the three baseball umpires and how they call balls and strikes. The first said, “I just call ’em as they are.” The second said, “I call ’em as I see ’em.” The third, the social constructivist, declared, “They ain’t nuthin ’til I call ’em!” Of course, unlike baseball, NPOs have no single umpire. All stakeholders are permitted to “call” effectiveness, and some will be more credible or influential than others. We have found that different stakeholders who are judging the same nonprofit often do not agree on that NPO’s effectiveness. Furthermore, their judgments often will change over time.23 How to operationalize this multiple constituencies approach is straightforward. Step 1 is to keep in mind that high performance is always an

Chapter = c01

6

Date: Dec 7, 2010

Time: 5:56 pm

Setting the Frame

issue of comparison. Sometimes you compare yourself to others, as Michael Porter recommends in his modification of Peter Drucker’s doing-things-right approach by defining organizational effectiveness as “performing similar activities better than rivals perform them.”24 Sometimes it’s that and more, as David Renz and Robert Herman describe: The comparison may be to the same organization at earlier times, or to similar organizations at the same time, or to some ideal model, but effectiveness assessments are always a matter of some kind of comparison. And the basis for the comparison is a key (though sometimes hidden) element in defining effectiveness (and why we often disagree about it).25 This certainly appears to be the case with the Alliance for Nonprofit Management—an association of capacity builders serving nonprofits— where the test of capacity building is “whether organizations and the sector as a whole have become stronger and more effective in their efforts.”26 How do you know you’ve become stronger unless by comparing yourself to an earlier time or to something else? And the essential test of organizational change efforts in general? Just one question: “Are we better today than we were yesterday?”27 In other words, “You’re either getting better or you’re getting worse each day. There’s no such thing as staying the same.”28 This is certainly what Jerry Porras and Jim Collins found in their study of built-to-last companies that “focus primarily on beating themselves [by] relentlessly asking the question, ‘How can we improve ourselves to do better tomorrow than we did today?’”29 In step 2, you don’t ask the stakeholder how the agency is doing with regard to this or that characteristic (e.g., fund raising); you ask instead “how well the organization has been doing on whatever is important to them.”30 Add up the scores to get an average, and you’re good to go. Because comparison is always a part of effectiveness, how that average moves up or down over time becomes a “useful overarching criterion for resolving the challenge of differing judgments of NPO effectiveness by different stakeholder groups.”31 And even though everyone is probably using a different criterion for what is being evaluated, that’s the nature of the multiple constituencies approach; doing anything else is a waste of time since not everyone will buy into it.32 This approach to understanding high performance—that it is whatever stakeholders say it is—is not new by any means. Nearly 25 years ago, Kim Cameron argued that the goal approach itself is a social construct that is subject to the same realities of all approaches, “Criteria for judging organizational effectiveness are founded in the preferences and guidelines of

Chapter = c01

Date: Dec 7, 2010

Time: 5:56 pm

The Four Pillars of High Performance

7

individuals. Individual differences preclude consensus regarding one universal set of criteria.”33 At about the same time, Anne Tsui asserted that managers “gain and accrue a reputation for being effective by meeting the expectations of each of the multiple constituencies.”34 Rosabeth Moss Kanter and Derick Brinkerhoff take this viewpoint as well, “Effectiveness appears to be less a scientific than a political concept. . . . Multiple constituencies and multiple environments require multiple measures.”35 Melissa Stone and Susan Cutcher-Gershenfeld also found this in a review of ten studies on high performance in nonprofit organizations.36 Ditto for Barbara Blumenthal, who reviewed over 100 articles on organization high performance and organization change and more than 30 assessments of capacity building, and had interviews with more than 100 people practiced in capacity building. And which were the most important high-performance factors? She found that “it all depends.”37 This is certainly what the folks at the Stanford Social Innovation Review learned when they evaluated the Review’s performance at the one-year anniversary and learned that “depending on their perspective and interests, different stakeholders have widely divergent definitions of performance, and as a result, multiple and sometimes incompatible metrics for which they would like to hold us accountable.”38 Multiple constituencies—which some call social constructivism instead—may indeed be the way of the future, but the practical challenges of “They ain’t nuthin ’til I call ’em” are obvious. Nonprofits have multiple constituencies with vastly differing viewpoints and levels of experience. Stakeholders include clients who may be impoverished and living in ghettoes and funders who may be very wealthy individuals living in gated enclaves. Just picture “the dangers of a situation where a single nonprofit has multiple funders, all of which put a high priority on building capacity and effectiveness but each of which favors a different path to enlightenment.”39 Making sense of all of these viewpoints is difficult for many, especially given the inherent conflicts. It may be true as that whatever works, works when it comes to determining high performance, that no “one approach to effectiveness is inherently superior to another.”40 Even so, how can we make sense of the obvious contradictory nature of the goal attainment approach when compared to the “I calls ’em as I sees ’em” social constructionist method? In the former, you achieved the stated goal or you didn’t. In the latter, the answer you get on a rainy Monday morning from your board chair may differ significantly from the answer on a sunny Friday afternoon. Given the foregoing, it is little surprise that Rick Cohen, executive director of the National Committee for Responsive Philanthropy, says, “There is

Chapter = c01

Date: Dec 7, 2010

8

Time: 5:56 pm

Setting the Frame

still no hard-and-fast definition through the philanthropic world as to the parameters and indicators of nonprofit effectiveness.”41 Like Kim Cameron’s declaration that “agreement about effectiveness is mainly an agreement to disagree,”42 when it comes to the nonprofit sector, “little consensus has emerged, either theoretically or empirically, as to what constitutes organizational effectiveness and how best to measure it.”43 After reading this, one cannot help but feel sympathy for Sara E. Mel´endez, former executive director of Independent Sector, who said in an outgoing interview, “Some people would probably see me walking on water and say, ‘See, I told you she couldn’t swim.’”44 Thus, whether your organization is a high performer is in the eyes of the beholder; the criteria they will use are going to be theirs and theirs alone. It may be the goal model, it may be the quality of the leadership of the agency, it may be the organization’s reputation with funders, or it may be something else entirely. What matters is not what you think constitutes high performance, but what your stakeholders think. And as you will soon see, what they think about how to become high performing is quite specific.

The Third Envelope A retiring executive director left three sealed envelopes for his successor to open in case of emergency. Sure enough, within her first year, the new executive director was forced to tear open the first envelope as the result of declining revenues. Inside was the sage advice to announce a new fundraising campaign. She did just that, the board and community cheered her initiative, and the crisis abated. Less than a year later, the campaign results were found to be lacking, and the new executive was forced to open the second envelope. When she announced the cost-cutting campaign, the praise was loud and clear, except, of course, for the folks who lost their jobs. Thankfully, the crisis subsided, but the peace was short lived as the cost cutting only forestalled and intensified the crisis. With trembling hands and her two-year anniversary just weeks away, the executive director ripped open the third envelope, which said, quite simply, “Prepare three envelopes.” So what now? Is it time for the third envelope when it comes to what it means to be a high-performing nonprofit? Must we live in a cynical world where “good managers are ‘spin doctors’”?45 Why should we care at all about what high performance means? The reason is simple: The need to demonstrate that one structure, reward system, leadership style, information system, or whatever, is better in some way than another

Chapter = c01

Date: Dec 7, 2010

Time: 5:56 pm

The Four Pillars of High Performance

9

makes the notion of effectiveness a central empirical issue. . . . Practically, organizational effectiveness is not likely to go away because individuals are continually faced with the need to make judgments about the effectiveness of organizations.46 The trick is to do exactly what Robert Herman and David Renz recommend and “find out what criteria are important to the different constituencies.”47 Thus, we can turn to experts in the field who have identified levers for building the capacity to be effective; in other words, the criteria of high performance.48 That’s because capacity at the most general level is described as an organization’s abilities to accomplish its mission.49 Because of the broadness of the term, we often describe capacity by the interventions that build it. These include “strategic planning, board development and technology upgrades,”50 a “blend of sound management, strong governance, and a persistent re-dedication to achieving results,”51 and the “development of an organization’s core skills and capabilities, such as leadership, management, finance and fundraising, programs and evaluation.”52 In the funding community, Barbara Kibbe, former vice president, program and effectiveness, of the Skoll Foundation, defines capacity as “the ability of an organization to define a meaningful mission, generate the tangible and intangible resources to advance that mission, and deploy those resources efficiently and well in the accomplishment of its work.”53 For Kevin Kearns, former president of the Forbes Funds that dedicated all annual funding to capacity-building efforts in the Pittsburgh region, capacity building includes “activities such as direct consulting with nonprofit organizations on specific operational or policy issues, training seminars and other professional development programs to enhance the skills of staff and volunteers.”54 The Alliance for Nonprofit Management defines capacity as the organization’s ability “to achieve its mission effectively and to sustain itself over the long term.”55 Giving an indication of how broad the concept can be is the following statement from the Alliance: Capacity building refers to activities that improve an organization’s ability to achieve its mission or a person’s ability to define and realize his/her goals or to do his/her job more effectively. For organizations, capacity building may relate to almost any aspect of its work: improved governance, leadership, mission and strategy, administration (including human resources, financial management, and legal matters), program development and implementation, fundraising and income generation, diversity, partnerships and collaboration, evaluation, advocacy and policy change, marketing, positioning, planning, etc. For individuals, capacity building may relate to leadership development, advocacy skills,

Chapter = c01

Date: Dec 7, 2010

Time: 5:56 pm

10

Setting the Frame

training/speaking abilities, technical skills, organizing skills, and other areas of personal and professional development.56 Grantmakers for Effective Organizations takes the prescriptive path by recommending that the effective nonprofit “fulfill its mission by measurably achieving its objectives through a blend of management, strong governance, and a persistent rededication to assessing and achieving results.”57 Jamie Lee of the Kauffman Foundation prescribes six attributes of the effective organization: mission directed and vision driven, outcomes oriented, sustainable, entrepreneurial, adaptable, and customer focused.58 Barbara Kibbe says that planfulness, effective leadership, and strong governance are the three central features of high performance.59 Christine Letts, William Ryan, and Allen Grossman talk about the ability of organizations to fulfill their missions in a dynamic world where they “not only develop programs, but also operate, sustain, improve, and grow them—eventually replacing them with new approaches.”60 As obviously illuminated in the foregoing, and as Paul Light observes, capacity building includes “dozens, if not hundreds, of applications, from training programs to strategic planning, board development, management systems, leadership recruitment, organization restructuring, and fund raising.”61 No wonder that “the most important challenge faced by those who would focus on NPO effectiveness is that of the criterion. Is it possible to settle on a small number of fairly easily measured indicators”?62 Grouping the ideas around common themes brings order to the many ideas from the capacity-building experts above plus Paul Light’s Pathways to Nonprofit Excellence study63 and Robert Herman and David Renz’s objective effectiveness criteria.64 As shown in Table 1.1, what one finds in the third envelope are the four pillars of high performance: purpose, strategy, operations, and governance. Translating these uses into a graphical representation reveals the Results Now model as shown in Figure 1.1.

STRATEGY

OPERATIONS PURPOSE

Delegation

Accountability

GOVERNANCE

FIGURE 1.1 Results Now Model

Chapter = c01

– Leadership, effective leadership – Adaptable, entrepreneurial, develop programs, customer focused – A persistent rededication to assessing and achieving results, goals or objectives, have a strategic plan for the future, organization restructuring, persistent rededication to achieving results, planfulness, planning document, statement of organization effectiveness criteria, strategic planning, vision driven, development of an organization’s core skills and capabilities, organization’s abilities to accomplish its mission, collaborate with other organizations

Leadership Strategy Planning

– Cost cutting, deploy those resources efficiently, finance – Are good fund raisers, fund raising, generate at least some unrestricted income, generate the tangible and intangible resources to advance that mission, have a diversified funding base, sustainable – Management, management systems, sound management, technology upgrades, use information technology such as email and the Internet to enhance performance, use data to make informed decisions

Budgeting Fund raising

Management

(Continued )

Time: 5:56 pm

Mission

OPERATIONS

– The ability of an organization to define a meaningful mission, mission directed, mission statement

Uses

STRATEGY

Levers

PURPOSE

Advice

Date: Dec 7, 2010

TABLE 1.1 Four Pillars of High Performance

11

Chapter = c01

12

Date: Dec 7, 2010

TABLE 1.1 (Continued) Advice

Levers

Time: 5:56 pm

Finance Assessment

GOVERNANCE

– Independent financial audit – Description of or form used in CEO performance appraisal evaluation, have experienced significant growth in demand for their programs and services over the past five years, measure the results or outcomes of what they do, outcomes oriented, programs, regularly survey clients regarding programs and services, report on most recent needs assessment, use of form or instrument to measure client satisfaction, operate-sustain-improve-grow

Staff

Accountability

Board Delegation

– Board development, governance, bylaws containing a statement of purpose, board manual, have a clear understanding with their boards about their respective roles, hold regular board meetings (at least four times a year), leadership recruitment, list or calendar of board development activities, strong governance – Encourage staff to work in teams, executive transitions/successions, foster open communications, give staff authority to make routine decisions on their own, have a participatory style of management, know how to motivate people, leadership/mentoring/coaching, have few barriers between organizational units, have few layers of management between the top and bottom of the organization, have position descriptions for their staff, have programs or resources for staff training, organizational assessment and development, training programs

Uses

Chapter = c02

Date: Dec 13, 2010

Time: 10:15 am

CHAPTER

2

Planning Rules Good things only happen when planned; bad things happen on their own. —Philip B. Crosby1

I

t should come as no surprise that the four pillars have a planning sensibility. Along with opposable thumbs, planning is one of the essential characteristics of being human. As opposed to simplistic behaviorism wherein we are slaves to the stimuli around us, George Miller, Eugene Galanter, and Karl Pribram argue in their landmark book that complex human behavior is governed by plans we make, from the mundane—getting up and going to work in the morning—to the momentous—winning the gold medal in an Olympic event.2 David Lester goes even further in saying that “plans are being executed as long as we are alive. The question is not ‘Why are plans being executed?’ but ‘Which plans are being executed?’”3 No practitioner or scholar would disagree that the making of plans, the essence of which is setting goals, is a fundamental obligation of leadership. The notable James McGregor Burns says, “All leadership is goal-oriented.”4 This is true whether it is a solution to an intractable problem, a goal, or dealing with things that need to be done.5 Clearly, leaders are listening. Results from a survey of 708 for-profit companies on five continents in 2003 placed strategic planning at number one on the list of management tools with a usage ranking of 89 percent,6 which was the same position as it was in 2000.7 The first place position of strategic planning did not change in 2007.8 Though strategic planning ceded its highest-usage position in 2009 to benchmarking, it still earned top billing for overall satisfaction.9 The nonprofit sector reflects the for-profit sensibility to plan, and highperforming executive directors wholeheartedly endorse the practice. When

13

Chapter = c02

Date: Dec 13, 2010

14

Time: 10:15 am

Setting the Frame

asked what below-average organizations could do to improve performance, strategic planning garnered the highest marks for what worked by these best-of-class executives.10 And when these same executives were asked what particular management tool had most improved the performance of their own organizations, strategic planning again received the highest marks. These high-performing executives clearly walk their talk, given that 91 percent had strategic plans in place at their own organizations.11 Strategic planning is not only a high-performer attribute; three out of five do it. A study of 1,007 nonprofit organizations found that almost 60 percent of all nonprofits had strategic plans, and the bigger the organization, the more likely it is: 52 percent of organizations with budgets under $250,000 have them compared to 80 percent of organizations with budgets of $10 million and over.12 Not only do nonprofits endorse the practice, management services organizations surveyed by the Alliance for Nonprofit Management rank strategic planning as the number one item on the capacity-building menu. What makes this even more significant is that help with fund raising is most sought after by their clients, but it was tied for fifth place with management and human resources.13 Though you might be hungry for fund raising, strategic planning is the featured item on the capacity-building menu. Independent Sector, a “nonprofit, nonpartisan coalition of more than 700 national organizations, foundations, and corporate philanthropy programs, collectively representing tens of thousands of charitable groups in every state across the nation”14 also recommends strategic planning. Doing so, it says, will help organizations “be more efficient and effective in mapping out a system for achieving organizational goals and making the best choices to fulfill their missions.”15

Just Say No Does establishing a disciplined framework for thinking about the future have to be painful? Is it true that the thicker the document, the more successful the outcome will be? Does any approach to planning, including Results Now, have any real value? Boards and executive directors thinking about planning can understandably become concerned about the investment of time and resources. Questions will arise about whether there is value in having a framework at all. After all, to achieve its chosen destiny, an organization must be strong and stable, while at the same time quick and innovative. The job is complicated and often contradictory:

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

15

Organizations are supposed to be simultaneously loose (that is, decentralized into relatively autonomous units) and tight (strongly controlled from the top); big (possessing extra money for good ideas) and little (with everyone having a stake in the organization’s success); young (characterized by new people and new ideas) and experienced (stocked with seasoned professionals who know what they are doing); highly specialized (with individual employees and units focused on narrow pieces of the organization’s overall job) and unified (with everyone sharing in the mission).16 Building an organization that can achieve a chosen destiny is a perplexing challenge. The people who are needed to push the envelope for innovation chafe under the very structure required to support the innovation once born. In the contradictory environment, the value of imposing the structure of any disciplined approach to planning is often hotly debated. With all due respect to the three out of five who do it and the near unanimity of recommendations, there are a number of complaints people raise as justification for not joining the cause. The most prevalent is that few people actually use their strategic plans in the here and now, that they really do gather dust. Here’s how it all works, according to balanced scorecard experts Robert Kaplan and David Norton: To formulate their strategic plans, senior executives go off-site annually and engage for several days in active discussion facilitated by senior planning and development managers or external consultants. The outcome of this exercise is a strategic plan articulating where the company expects (or hopes or prays) to be in three, five and ten years. Typically, such plans then sit on executives’ bookshelves for the next 12 months.17 Unfortunately, a study of human service executives by Karen Hopkins and Cheryl Hyde lends support to this viewpoint. It found that only 27 percent reported using strategic planning as a way to address real agency problems.18 The authors of the study suggest that the cause of this “may be that managers are overwhelmed with the problems with which they have to contend, and that may interfere with strategic problem-solving.”19 Or it could be that Henry Mintzberg is right, that the “nature of managerial work favors action over reflection, the short run over the long run, soft data over hard, the oral over the written, getting information rapidly over getting it right.”20 Going with your gut is human nature and it is often done with very little hard information: “Study after study has shown that the most effective managers rely on some of the softest forms of information, including gossip, hearsay, and various other intangible scraps of information.”21 Add a

Chapter = c02

16

Date: Dec 13, 2010

Time: 10:15 am

Setting the Frame

bias for intuition to reliance on soft information and you come up with the planning fallacy where “managers make decisions based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities. They overestimate benefits and underestimate costs. They spin scenarios of success while overlooking the potential for mistakes and miscalculations.”22 The second major complaint about planning is that the very organizations that need it most can least afford to do it, from money and time perspectives. After all, four out of five nonprofits have expenses of less than $1 million, three out of four are less than $500,000, and 45 percent are smaller than $100,000.23 These numbers cover only the 1.4 million public charities that filed form 990s with the IRS and does not include the other 1.6 million flying under the radar.24 Staffing, especially the paid full-time variety, is in short supply since half of all nonprofits reporting have five or fewer full-time staff members and nearly 30 percent have one or none.25 Complicating matters is that board members, who many experts argue should be very involved in strategic planning, are strapped for time, to put it mildly. Hoping that the nonprofit executive director brings planning expertise to the table is wishful thinking since most are first-timers in the job.26 Juxtapose these realities against the time required by most planning processes. John Bryson’s highly respected nonprofit strategic planning model requires a meeting agenda of 18 to 20 hours over three months.27 Michael Allison and Jude Kaye’s moderate approach requires a time frame of one to three months; the extensive method needs four to eight months.28 Not including homework, Bryan Barry’s compact protocol takes 18 to 20 hours over 5 months; his longer version requires 60 to 65 hours over 15 months.29 Looking to the private sector offers little hope for anything faster: The ironically titled Simplified Strategic Planning: A No-Nonsense Guide for Busy People Who Want Results Fast calls for a seven-day, 56-hour agenda spread out over three months.30 Making matters worse, most of these strategic planning processes deal with strategy only; the operating plans and governance matters of delegation and accountability aren’t included. It’s not so much the amount of time that gives one pause; it’s what can happen during those long stretches. If you’d decided to use a three-month approach in the late summer of 2008 when the Standard & Poor’s 500 stood at nearly 1,300, you would have been living in a decidedly different world right before Thanksgiving when the S&P 500 was down nearly 40 percent to about 750. Those who do not want to invest time in building a framework often recollect their own personal experiences that were painful and led to little or no impact on the organization. They remember the exquisite misery of working for months and months on programs that were never utilized. As one trustee said,

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

17

I can still recall the endless hours of meetings with the consultant pounding away at us about strengths and weaknesses. It led to a document so thick that it made for a better doorstop than a plan of action. The bulk of the board didn’t understand it; that was okay, but what really hurt was that the staff didn’t understand it either. They simply discarded it and went about their business just as they had before we began the process. The third major reason that people give for avoiding planning is that planning isn’t fluid enough to allow for the unexpected. No one wants to work on things that end up as wasted efforts. Many of the opportunities that arise cannot be anticipated in formal planning processes. A competitor loses its executive director and thus creates a chance for merger. A foundation board changes its focus in a way that invites a new program. Why not just wait for these sorts of opportunities to come up and then seize upon them? This is certainly the observation that gurus Jim Collins and Jerry Porras make: Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and—quite literally—accident. What looks in retrospect like brilliant foresight and preplanning was often the result of “Let’s just try a lot of stuff and keep what works.” In this sense, visionary companies mimic the biological evolution of species. We found the concept in Charles Darwin’s Origin of Species to be more helpful for replicating the success of certain visionary companies than any textbook on corporate strategic planning.31 Adding more weight to a “fast and loose” approach to strategy is some compelling evidence that planning doesn’t make a lot of difference in the smaller, entrepreneurial organizations that epitomize the nonprofit sector. Though the value of strategic planning on small firms with 100 or fewer employees was confirmed in one meta-analysis, “the effect sizes for most studies are small [and] it may be that the small improvement in performance is not worth the effort involved.”32 Whether the organization is an entrepreneurial start-up also appears to moderate the benefits. A 1990 National Federation of Independent Business study of nearly 3,000 start-ups “showed that founders who spent a long time in study, reflection, and planning were no more likely to survive their first three years than people who seized opportunities without planning.”33 In another study of 100 founders of the fastest-growing companies, only 28 percent had a full-blown plan when they started out. Because of the dynamic environment that entrepreneurs face, “an ability to roll with the punches is much more important than careful planning.”34

Chapter = c02

18

Date: Dec 13, 2010

Time: 10:15 am

Setting the Frame

Strengthening the argument that planning is a waste of time is Henry Mintzberg’s recommendation that “conditions of stability, controllability, and predictability [are] necessary for effective planning.”35 As such, he acknowledges the significant impact that the environment can have on the organization. While the research on planning is not conclusive, there is reasonable evidence to suggest that planning is less appropriate in times of crisis: An organization may find itself in a stable environment for years, sometimes for decades with no need to reassess an appropriate strategy. Then, suddenly, the environment can become so turbulent that even the very best planning techniques are of no use because of the impossibility of predicting the kind of stability that will eventually emerge.36 Juxtapose the need for stability against the helter-skelter realities of most nonprofits, and you come up with a resounding recommendation to just say no. As the fictional HBO character Tony Soprano would say, “Fuhgeddaboudit.” The idea here is that you shouldn’t try to control the world, but let the world control the organization. Reacting as a strategy is not uncommon as John Kay in his Why Firms Succeed explains: The notion that successful strategies are often opportunistic and adaptive, rather than calculated and planned, is a view as old as the subject of business strategy itself. One of the best expressions of it is Lindblom’s (1959) exposition of the “the science of muddling through.” . . . Lindblom’s perspective was most extensively developed by Simon (1961) and Cyert and March (1963). They deny that organizations can sensibly be viewed as entities with personalities and goals like those of individual people. Rather, firms are better seen as shifting coalitions, in which conflicting demands and objectives are constantly but imperfectly reconciled, and all change is necessarily incremental. In this framework, rationalist strategy—in which senior management chooses and imposes a pattern of behavior on the firm—denies the reality of organizational dynamics.37 A reactive approach to thinking about the future has validity. Take the case of the Victoria Theatre Association, where I was the chief executive from 1990 to 2005. Two of its biggest strategic changes during that period occurred serendipitously. The first began as a conversation with the board president of the Human Race Theatre Company and happened when we bumped into each other on a street corner. Ten months later, the Next Stage Series was born with an annual price tag of $1 million. The new series with

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

19

its off-Broadway flavor was staged by the Human Race while the front-ofhouse including marketing, administration, fund raising, and the like was provided by the Victoria. Not only did it stabilize funding for the Human Race and pay off its accumulated deficit, the collaboration built new audiences and ensured that professional theatre would continue to be produced locally for years to come. The second serendipity for the Victoria was even more dramatic and involved the Dayton Opera. On a beautiful spring day and quite out of the blue, the head of the Opera’s executive committee called me to express interest in a possible alliance. “Could we get together with the committee that afternoon,” he asked. And get together we did. That the Dayton Opera was one of the treasures of the community was not in question. That the Dayton Opera was going through one of the most difficult periods in its history and was teetering on the edge of financial collapse was also not in question. After just one balanced budget in seven seasons and a steady decline in activity and attendance, the board recognized its precarious situation and entered into a management alliance with the Victoria that was implemented in a few short months. Unfortunately, the alliance came too late for the Opera to avoid its worst deficit ever. Subcriptions hit a rock-bottom low at less than 2,600. Coming off a high of over 5,000 in the late 1980s that earned the Opera the status of the state’s best, the condition of the organization just 10 years later was a stunning reversal. Fortunately, the community of funders applauded the alliance. Through an intensive effort, enough money was raised to pay off the Opera’s accumulated deficit, capitalize its operations for a few years as it worked its way out to a balanced budget, and create a cash reserve. At the same time, the new alliance built capacity throughout the two organizations and improved strategic position. The Opera was able to hire its first full-time artistic director, and the quality of its productions earned raves and new audiences. It was a classic turnaround that delivered standing ovations. Both of these changes for the Victoria occurred as a result of luck. No visioning process anticipated these opportunities. No strategic planning process covered the possibility of such high-impact opportunities. As such, you might well argue that the right answer about planning is to simply “just say no,” as Nancy Reagan was known to do.

Just Say Yes As suggested earlier, the value of strategic planning has been a matter of considerable debate and research. Brian Boyd’s meta-analysis of 21 studies representing nearly 2,500 for-profit companies at first seemed to suggest

Chapter = c02

20

Date: Dec 13, 2010

Time: 10:15 am

Setting the Frame

that strategic planning had a very weak effect on performance, but when measurement errors were taken into account, he found that the studies were guilty of “seriously underestimating the benefits of planning [because] many firms do report significant, quantifiable benefits.”38 More evidence from a later analysis led to the striking conclusion that strategic planning “appears to double the longer term likelihood of survival as a corporate entity” as compared to nonplanners.39 A different review of 35 studies found “strategic planning to positively affect firm performance . . . equally in large and small and capital-intensive and labor-intensive firms.”40 When it comes to nonprofits, Melissa Stone, Barbara Bigelow, and William Crittenden reviewed more than 65 studies representing over 2,000 nonprofit organizations and did not find a conclusive relationship between planning and performance.41 Though some have seen this as evidence of a weak link between strategic planning and performance,42 the lack of clarity is because so few of the studies in the metaanalysis sought to examine the relationship between formal planning and performance.43 Moreover, Robert Herman and David Renz argue that the “evidence supports the view that strategic planning is related to effectiveness.”44 One of the studies that did examine that relationship was Julie Siciliano’s, which looked at 240 YMCA organizations and found that “those organizations that used a formal approach to strategic planning had higher levels of financial and social performance than those with less formal processes.”45 This particular study is notable because the studies investigating the link between planning and performance are few and far between.46 At the most basic level, and according to Henry Mintzberg, there is only one reason to engage in planning—to “translate intended strategies into realized ones, by taking the first step that can lead to effective implementation.”47 Put another way, “the very purpose of a plan or the action of planning is to prepare for future activity.”48 Even though “strategies can appear at all kinds of odd times, in all kinds of odd ways, from all kinds of odd places,”49 we usually engage in planning because we want to implement the strategies that we already have in place or the new ones that we have discovered or designed. Remember the earlier advice from Jerry Porras and Jim Collins about visionary companies? The one where they say these firms make “some of their best moves by experimentation, trial and error, opportunism, and— quite literally—accident.”50 The problem with this statement is the word some in the first sentence. If visionary companies make only some of their best moves by experimentation, what do they do about the rest of their moves? The issue here isn’t about where strategies come from; use peyote and a sweat lodge if that’s what works for you. Do try a bunch of things and

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

21

see which one works. See what others are doing in your field, imitate, and improve. Don’t try to control the world; let the world control the organization. But, eventually, you will have to program those strategies into some workable protocol that allows you to execute. As Larry Bossidy and Ran Charan warn, “Strategies most often fail because they aren’t executed well. Things that are supposed to happen don’t happen.”51 Scholars and practitioners have identified many benefits for undertaking a planning process. Beyond the primary benefit of planning to program current or new strategies, Henry Mintzberg adds communication media and devices for control; the analysis, identification, and evaluation of potential strategies; and helping others to think strategically.52 Leonard Goodstein, Timothy Nolan, and William Pfeiffer say that planning is useful to give “a framework for action [to] unleash the energy of the organization behind a shared vision [and] to constantly adjust to current events and actions by competitors.”53 McKinsey gurus Eric Beinhocker and Sarah Kaplan find just two benefits: The first is to build “prepared minds”—that is, to make sure that decision makers have a solid understanding of the business, its strategy, and the assumptions behind that strategy, thereby making it possible for executives to respond swiftly to challenges and opportunities as they occur in real time. The second goal is to increase the innovativeness of a company’s strategies. No strategy process can guarantee brilliant flashes of creative insight, but much can be done to increase the odds that they will occur.54 Back to nonprofits, Michael Allison and Jude Kaye offer two reasons to plan: it improves focus and it improves the way people work together.55 John Bryson and Farnum Alston give seven reasons: increased high performance, increased efficiency, improved understanding and better learning, better decision making, enhanced organizational capacities, improved communications and public relations, and increased political support.56 John Bryson names four, including “the promotion of strategic thought and action . . . improved decision making . . . enhanced organizational responsiveness and improved performance . . . directly benefit the organization’s people.”57 Bryan Barry has seven advantages, including improved results, momentum and focus, problem solving, teamwork-learningcommitment, communication and marketing, greater influence over circumstances, and a natural way to do business.58 Grouping these many ideas—for-profit and nonprofit—around common themes gives order to the benefits and uses of planning as shown in Table 2.1.

Chapter = c02

Date: Dec 13, 2010

Time: 10:15 am

22

Setting the Frame

TABLE 2.1 Benefits and Uses of Planning Benefits

– The analysis, identification, and evaluation of potential strategies, to constantly adjust to current events and actions by competitors, greater influence over circumstances, increase innovativeness

Identify Strategies

– The promotion of strategic thought and action, a framework for action, momentum, focus, program current or new strategies, helping others to think strategically, directly benefit the organization’s people

Set Direction

– Communication media, improved communications and public relations, communication and marketing, prepared minds – Improves the way people work together, unleashes the energy of the organization behind a shared vision, teamwork-learningcommitment, improved understanding and better learning, devices for control

Communication

– Enhanced organizational responsiveness and improved performance, increased effectiveness, increased efficiency, enhanced organizational capacities, improved results, problem solving, a natural way to do business, improved decision making, better decision making – Increased political support

Operational Effectiveness Enhanced Legitimacy

Uses Create

Ideas

Program Implement

Coordinate Action

Achieve Results

In other words, a planning process like Results Now can create, program, and implement strategy to achieve results. And if this is not enough to convince you, think about the fundamental responsibility of the board as argued by William Bowen, president of the Andrew W. Mellon Foundation: Perhaps the overriding obligation of boards in both sectors is to require that a sensible plan of some kind be in place and that it be monitored carefully. It is surprising how frequently no real planning occurs, especially on the part of the nonprofit world. And it is even more surprising how frequently plans that were adopted are not tracked in even the most rudimentary fashion.59 Why should Bowen be surprised that no real planning occurs or that organizations do not track the plans adopted? At the end of the day and

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

23

despite the efforts that boards make, there will be members who miss meetings and who don’t read advance materials. There will be disruptive members, those who are too involved with the organization, and those who are disconnected. There will always be inexperienced members and members who ignore the organization’s annual fund appeal. There will be novice executive directors. That’s why well-designed planning processes have value, ones that are quick and practical, not too much and not too little. The first point in W. Edwards Deming’s Management Method, widely credited for turning around Japanese industry and restoring American quality to world leadership, is to create constancy of purpose. This constancy of purpose does not originate in a reactive environment: “It is easy to stay bound up in the tangled knots of the problems of today, become ever more and more efficient in them.”60 And what is Dr. Deming’s recommendation? A plan for the future.

Show Me the Money In Cameron Crowe’s film Jerry Maguire, Cuba Gooding Jr. (who won a bestsupporting Oscar for his performance) plays Rod Tidwell, an aspiring tight end who believes that he’s worth a lot of recognition both financially and otherwise. Rod Tidwell’s personal mission is a four-word sentence: “Show me the money.” In trying to convince Rod Tidwell that it takes confidence plus performance to win the game, Jerry Maguire introduces his own fourword personal mission: “Help me help you.” Forget all the other reasons for planning, especially when it comes to funding; if there’s one thing that helps funders help you and shows you the money, it’s planning. First, using the plan as a communications tool has tremendous value because it tells the story of what the organization is trying to accomplish, the direction it is heading. If what Howard Gardner observes is true, that “the artful creation and articulation of stories constitutes a fundamental part of the leader’s vocation,”61 then at some point the leader must create the script for that story. As such, planning provides better communication media by generating necessary information and data that is useful for things like the annual message, grant writing, sponsorship proposals, and the like. Instead of an off-the-cuff approach that cobbles things together, Results Now provides real information, honestly constructed, to form messages that build trust that can then form much of the content needed. Moreover, such a planning process improves internal communications by providing a means to stimulate meaningful conversation about what the organization is trying to accomplish. It brings people together by providing a common language and vocabulary concerning the organization’s efforts.

Chapter = c02

24

Date: Dec 13, 2010

Time: 10:15 am

Setting the Frame

More specifically, an organization doing a comprehensive job of planning that includes strategy, operations, and governance elements will be able to raise money more effectively. After all, in order to be successful in fund raising, a strong case statement always needs to be made. And that goes for both established and emerging agencies: When nonprofits make a pitch for a donation, they describe their longest running programs, show how well they manage money, and tout their success stories. But when start-up organizations look for seed money, they can’t point to their achievements. To compensate, they must have a wellthought-out plan, something in writing that they can show prospective funders.62 As funds get tighter and funders become more concerned about organizational capacity, the nonprofit with a comprehensive plan can prove that it has all the elements in place to address any questions about strategy, operations, and governance. The inclusion of a well-executed plan in a funder packet engenders confidence. It is an impressive document, which shows the potential funder that the organization takes its business seriously. In a world in which general operating funds are increasingly difficult to identify, much less to secure, being able to build strong project-oriented proposals is necessary for garnering support. Unfortunately, a frequent claim from nonprofit executive directors is that their agencies are not project oriented, especially in the human service area. It is often a surprise when they find that there are indeed programs and services that are fundable from a program standpoint. Program support gives a sense of ownership to the donor, and it starts with a careful review of the organization’s lines of business, its key programs or services, its major products. These by themselves may merit sponsorship support. By breaking them into the various program components, most nonprofit organizations can create a sizable inventory of attractive funding opportunities. Any organization can do the homework to develop a roster of sponsorship opportunities and the necessary case statements for general fund raising. The difference between fund raising in an organization that plans and one that doesn’t is that proposals, solicitations, and opportunities for giving are driven from a carefully considered process that answers the question of where to go tomorrow, a question that every donor wants explained. Moreover, all people who raise money face the inevitable funder inquiry about programs that received support: “When did it happen?” Especially in the case of general operating support, funders often need an annual report outlining the results of operations for the fiscal year. Sponsors demand detailed reports about the funded project, and government agencies require

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

25

compliance summaries. Whatever it is called, whether it’s compliance or assurance, accountability is the underpinning. Rather than waiting until the last minute to produce the report of accomplishments based on hastily assembled activity logs, data, and statistics, a good plan has the needed information readily accessible. Second, enhanced legitimacy comes with planning. Remember that strategic planning is the top 2009 management tool for global business from a satisfaction standpoint.63 Remember that strategic planning garnered the highest marks for what worked by executives of high-performing nonprofits and that 91 percent of them had strategic plans in place at their own organizations.64 And don’t forget that three out of five nonprofits do it, and management services organizations make it their top field of concentration.65 It is hard to ignore the implications: If you want your nonprofit to grow into a high-performing nonprofit with a big budget (or get much needed funding), you need to have a plan. This viewpoint that planning is important is the elephant in the boardroom of agencies that don’t plan. But plan they eventually will as nonprofits “adopt formal planning when required to do so, suggesting that funders exert a form of coercive pressure on nonprofits.”66 Unsettling as it may be for those who don’t plan and uplifting for those who do is the news that nonprofits “appear to be rewarded for doing so through an increase in resources.”67 Woody Allen once said, “Eighty percent of success is showing up.”68 And that’s what legitimacy is all about. In a study of 330 nonprofits, the researchers found few significant relationships between formal planning and measures of performance, but they did find that “organizations in institutional environments will adopt elements of administrative practice and structure for their legitimating qualities, regardless of their effect on efficiency or performance.”69 In a different study comparing churches that plan and those that don’t, no significant differences were found, but “a formal written plan appears important for convincing funding sources that church administrators know what needs to be done and how it should be done.”70 Put directly, planning quite literally shows you the money.

Bottom Lines Even though the two major changes to the Victoria Theatre Association occurred as a result of luck, the third change came about as a result of carefully thinking about the future. Beginning with market research that concluded, “Families represent the greatest potential for future market growth,” the Victoria began planning to launch its new children’s theatre festival. The new program was initiated in a test fashion a year later and rolled out in a full launch the year after that with full funding guaranteed for three years. By

Chapter = c02

26

Date: Dec 13, 2010

Time: 10:15 am

Setting the Frame

planning for the dream, many of the problems that occur with experimentation are eliminated or minimized, including funding and organizational capacity. So which way is best? Is it the “Just say no” reactive approach in which no planning is good planning? Or is it the “Just say yes” proactive approach? There are those who will throw up their hands in the face of organizational complexity and the quickly changing world around them. They will complain about the plan that gathers dust on the bookshelf, and they will strenuously avoid wasting time in any exercise that attempts to think about the future. Meanwhile, back at the ranch, real people are doing real work. Whether consciously or not, each and every one of those people is making assumptions about the future. No matter what leaders may wish, actions today have impact on tomorrow, and when leaders deny this reality, it does little to help those people who must do the work of the organization. You either make a choice about the organization’s destiny or someone else will. As Stephen Covey says, “If you wait to be acted upon, you will be acted upon.”71 That someone acting on the organization may not be a board member or an executive director, but no matter what, someone, somewhere is going to give direction. Does the executive director or board president really want the marketing director to set the “vision du jour?” Give direction by default or do it by design, but one way or another, direction is going to be given. Paul Light, in his book Sustaining Innovation, studied 26 nonprofit organizations as he searched for common characteristics that would make the sporadic act of innovating a regular occasion. He identified four broad characteristics, including critical management systems that must serve the mission of the organization, not vice versa. About these management systems, he says: Rigorous management systems cannot be taken as a given and are essential for sound innovation. They also make the single act of innovation less an act of courageous defiance and much more a natural act central to achieving an organization’s mission.72 Building rigorous management systems is akin to what long distance runners must do to build muscle and endurance for the challenge of the race. That training, the mundane, day-to-day sweat and pain that prepares the athlete for the eventual race, is part and parcel of what it takes to win. It’s not glamorous, but it is necessary for success. An organization that uses a disciplined and comprehensive planning approach builds the necessary organizational muscle to win. The discipline required assures the board and the staff that essential systems will be in place that can give the organization the foundation for achieving its chosen destiny, whatever it may be.

Chapter = c02

Date: Dec 13, 2010

Planning Rules

Time: 10:15 am

27

There will always be people who believe that planning of any sort, long range, strategic, short range, is a waste of time. “The world changes so rapidly, all that can be done is react,” these people claim. Faced with the question of whether to act or to react, do both. Invest in a process that will give the security of direction, but don’t invest so much time and effort that changing course as conditions warrant becomes more difficult. Have a roof over your head that’s flexible, one that invites addition, modification, or outright abandonment, but don’t have a palace that must be worshipped and preserved because of its cost. Here’s the bottom line: Even if you don’t think you’re ready to do it, don’t think you need to do it, don’t want to do it, don’t care about it, don’t believe it matters, or know “whether planning leads to effectiveness or whether effectiveness leads to planning,”73 your stakeholders in general and funders in particular do believe it’s important, that it matters. Engaging in a planning process simply because your stakeholders believe it is important may appear to be the ultimate folly, but doing so is completely consistent in a world where nonprofit effectiveness is judged “in terms of response to the needs and expectations of their stakeholders.”74 For those familiar with philosophy, this argument for planning is similar on a small scale to Pascal’s Gambit, where it is better to believe that God exists than not believe because you have little to lose by believing and so much—both infinite and eternal—to gain. Henry Mintzberg puts it this way, “Too much planning may lead us to chaos, but so too would too little and more directly.”75 And Michael Porter asserts that “questions that good planning seeks to answer . . . will never lose their relevance.”76

Chapter = c02

Date: Dec 13, 2010

Time: 10:15 am

Chapter = c03

Date: Dec 13, 2010

Time: 11:54 am

CHAPTER

3

All Together To build a successful team, you don’t start out with people—you start out with the job. You ask: What are we trying to do? —Peter Drucker1

he four pillars of high performance—purpose, strategy, operations, and governance—together generate five essential questions that every organization must answer:

T ■ ■ ■ ■ ■

Why? Where to go tomorrow? What gets done today? Who does what? When did it happen?

These five questions can be answered in many different ways, from informal to formal. Results Now is a moderate approach that strikes a balance between these two extremes by creating a unified frame—a master plan—to guide the work of the organization. After all, and as noted in the Preface, Henry Mintzberg advises, “All viable strategies have emergent and deliberate qualities.”2 The task is to find a process that offers enough structure to be purposeful, but not so much that the organization loses its flexibility. Results Now strikes does just that by keeping things quick and practical—not too much, not too little. Unlike traditional methods, Results Now is an ongoing way of doing things, an essential part of day-to-day organizational life. First, the Results Now master plan itself is often used as a centerpiece of board meetings and many organizations include it as a standard part of board meeting advance information. Second, because the Results Now master plan is so

29

Chapter = c03

Date: Dec 13, 2010

Time: 11:54 am

30

Setting the Frame

uncomplicated, it can be refreshed as needed and at least annually as a regular part of day-to-day operations. Governance experts John and Miriam Carver argue that the job of leadership is to ensure that “the organization produces what it should . . . while avoiding situations and conduct that should not occur.”3 William Bowen, president of the Mellon Foundation, says, “Perhaps the overriding obligation . . . is to require that a sensible plan of some kind be in place and that it be monitored carefully.”4 For the Carvers, accomplishing the mission is the end; for Bowman, the plan is the means to that end. For organizations looking for a quick and practical way to do both, the five questions are the right questions, and Results Now offers a method for answering them.

Master Plan In the earliest iterations of Results Now, only three questions were addressed: ■ ■ ■

Why? Where to go tomorrow? What gets done today?

This is pretty standard stuff, the troika of planning. Though Results Now proved itself effective, a deficiency began to show itself. There was frequent confusion and conflict about duties, especially at the board and executive director levels. Complaints about micromanagement by boards were common among executive directors, while boards often complained about dull meetings and not having a great enough impact on the organization. In addition, concerns arose about the need to have a disciplined approach to monitoring performance so that the plans wouldn’t end up on a shelf gathering dust. Attempts to find a solution to the governance question often lead to the Policy Governance® model.5 Developed in the late 1970s, the model contains four policy elements: 1. Ends are mission related and serve as the board’s long-range plan. 2. Executive limitations clarify boundaries for the staff. 3. Board-executive linkage policies are concerned with delegation between board and staff. 4. Board process policies deal with how the board governs itself. By using the Policy Governance model, John Carver contends that boards can compose and then control policies about many of the governance variables. This turns out to be somewhat easier said than done.6

Chapter = c03

Date: Dec 13, 2010

Time: 11:54 am

31

All Together

STRATEGIC PLAN OPERATING PLAN Where to go tomorrow? What gets done today? Lines of business Goals Success Measures Budget Vision PURPOSE Why? Delegation Accountability Who does what? When did it happen? Duties Agendas Guidelines Assessments GOVERNANCE PLAN

FIGURE 3.1 Results Now Master Plan

The real answer to the delegation and accountability questions turns out to be a large dose of common sense: Decide who does what (delegation) and when it happened (accountability). Thus, the final resolution to the question of governance was the addition of the third and fourth questions: ■ ■

Who does what? When did it happen?

The output of Results Now is a master plan, which is a practical tool that will help make it possible for the organization to achieve its chosen destiny, whatever that may be. It is results driven and covers the five major questions, as illustrated in Figure 3.1. Results Now has its own distinct vocabulary that, in some ways, is familiar. It uses many words that are common to planning mission and vision, but these words may have different meanings for different people. Strategy is mostly about lines of business, which are the programs, services, or products that are the organization’s major activities. Though the term is quite common to the for-profit sector, if you are more comfortable using another word, simply take your pen and write in the word you like better. Results Now isn’t about forcing a vocabulary on anyone; it isn’t about demanding the “one true” answer. There are no right answers, just the right questions. Results Now is also not a magic bullet for achieving impossible dreams, making conflict go away in agencies, raising piles of money, or whatever else ails you. It won’t fix problems on its own; it won’t mend the unmendable. It is a tool—nothing more, nothing less. There will still be board members who fail to live up to their obligations or executive directors who deliver disappointing performance.

Chapter = c03

Date: Dec 13, 2010

32

Time: 11:54 am

Setting the Frame

Be Quick John, a veteran of a board that uses Results Now, says that the process “Bozoproofs an organization and its board.” It creates a context, a way of doing things, so that the difficult decision or difficult board and staff member, for that matter, can be confronted effectively. Bozo-proofing an organization by giving it a framework for consistently and capably managing itself is a sensible thing to do, but it must be a framework that is practical, one that doesn’t take a two-day orientation seminar to grasp. Of course, many might say there are easier ways to do this, and many organizations search high and low for solutions. We want to believe that we can correct all the problems. It is a search for symptomatic relief, however. Take boards, for example. Maybe they can be better if we have a smaller board or a bigger board, maybe more time for meetings or perhaps a shorter time requirement, more thorough advance materials or abbreviated information, meetings after work or breakfast meetings, an annual retreat off-site or no more retreats at all. Boards are not an end unto themselves; they are a means to an end. The proof of a great agency is in its accomplishments, not in how effective it is with recruitment and orientation of board members or the degree of satisfaction with meetings. These are means to an end, not an end itself. Stephen Covey’s immensely popular book The Seven Habits of Highly Effective People lists being proactive as its first habit: While the word proactivity is now fairly common in management literature, it is a word you won’t find in most dictionaries. It means more than merely taking initiative. It means that as human beings, we are responsible for our own lives. Our behavior is a function of our decisions, not our conditions. We can subordinate feeling to values. We have the initiative and the responsibility to make things happen.7 No one can deny the rationality of Covey’s argument, but it is not easy to make the transition from being reactive to proactive. Making proactivity come alive in an individual is difficult to cultivate; if it were not, Stephen Covey would have listed it as a footnote, not as the first of seven habits. And as hard as it is to get an individual to become proactive, there is the added difficulty for a collective like a nonprofit organization. Of course, to achieve a chosen destiny, the destiny must first be chosen. In order to become truly strategic, the organization must be both reactive and proactive. If not, it will be buffered by every trendy management fad or reform movement that comes along. It must be focused on delivering results now, not later.

Chapter = c03

Date: Dec 13, 2010

All Together

Time: 11:54 am

33

To do this requires a process that must answer Peter Drucker’s question that began this chapter: “To build a successful team, you don’t start out with people—you start out with the job. You ask: What are we trying to do?”8 To get to the answer, any effective process has to satisfy three requirements. First, the process used to build the plan must be quick, since board members and staff members do not have much time to give to the task. To be sure, building a Results Now master plan can be done at a more moderate pace. Most organizations decide to be quick about things. The cost for speed is that the master plan will have less refinement, but this can be balanced by making it an ongoing endeavor to polish it. In other words, the Results Now master plan puts a roof over the organization’s head; polishing it over time makes it a home and becomes the perpetual work of the board and staff. Quicker installations can be better than drawn-out ones for another reason. Because of the modest investment in time, the Results Now master plan is a home that no one will feel sad about renovating, selling, or rebuilding from scratch. It isn’t a palace that people are scared to live in. Boil this down into the adapted words of the great Prussian General Helmuth von Moltke and you get the point: “No business plan ever survived its first encounter with the market.”9 John Wooden once said, “Be quick, but don’t hurry,”10 and this epitomizes Results Now. Begin with what you’re doing now and not with what you’re doing next. Deciding what’s next—formulating strategy—is both a science and an art; it can take a lot of time or be a lucky break. As the eminent Henry Mintzberg notes, “Few if any, strategies are purely deliberate, just as few are purely emergent. One means no learning, the other means no control. All real-world strategies need to mix these in some way: to exercise control while fostering learning.”11 So be quick to understand what you’re doing now, but don’t be in a hurry to figure out what you’re doing next. Second, the Results Now master plan must be simple because the levels of experience are going to vary from member to member and within the professional staff. It must be user friendly for a wide variety of users. In the words of Albert Einstein, “Everything should be made as simple as possible, but not simpler.”12 Gone should be the long-winded mission statements and impossibly complicated documents that few can understand. The focus is on the critical few rather than the trivial many; those issues that will deliver the greatest results are the center of attention. Less is more; simple is better. This is all in keeping with what Tom Peters and Robert Waterman observed in the early 1980s: The project showed, more clearly than could have been hoped for, that the excellent companies were, above all, brilliant on the basics. Tools

Chapter = c03

34

Date: Dec 13, 2010

Time: 11:54 am

Setting the Frame

didn’t substitute for thinking. Intellect didn’t overpower wisdom. Analysis didn’t impede action. Rather, these companies worked hard to keep things simple in a complex world.13 Results Now gets much of its simplicity from using the 80/20 rule, which is formally known as the Pareto Principle. Vilfredo Pareto was an economist who declared that in any group of objects, 20 percent of the objects would account for 80 percent of the group’s entire value. For example, 20 percent of the donors contribute 80 percent of the funds in an annual campaign. In the process of building a Results Now master plan, it is important to focus on those issues that will have the most significant impact, the 20 percent that will deliver the 80 percent. The third rule of Results Now is that everything in the master plan should ultimately make a difference in the work that real people do in the here and now. Nothing should be included unless it informs the work that gets done today. If it is confusing or extraneous, it’s not in the Results Now master plan. For example, instead of an operating plan that contains every goal and action including what are essentially job duties (the 95 percent of jobs that we all do every day), Results Now includes only material goals (the 5 percent of new or improved things that we have a motivating shot at getting done). How involved the board is in each of these components depends on the particular circumstances of that organization. Some boards will be very involved. They will participate in setting the goals for staff departments. Other boards will be concerned only about the work of the board itself. Some boards will delegate the crafting of every element that builds a Results Now master plan to staff; other boards will be involved in every detail. Obviously, the degree of involvement on the part of the board is fluid and depends on a host of variables, including the experience of the executive, the amount and depth of staff, and resources available. A grassroots organization with a budget of less than $100,000 and no full-time professional staff will answer the five questions differently than a $10 million foundation. A board with 50 members will probably need an executive committee, a board of 12 might not, either of which is certainly agreeable. The point here is to focus on the five questions and derive answers that are appropriate to your particular place in time. The important point—critically important—about involvement is this: “Those who carry out strategy must also make it.”14 What this means is that if the staff who will implement the strategy are missing from the room, you are doomed to failure. So should the marketing director be in the room? The development officer? Absolutely, positively, yes—the more the merrier. Should you use a small, behind-the-scenes group of board members who will take the load off the larger group? Absolutely, positively not; there is

Chapter = c03

Date: Dec 13, 2010

All Together

Time: 11:54 am

35

nothing more fundamental and important to a great board—and being a great board member—than being involved in strategy setting. Results Now is not just for organizations that are already strong. In fact, it can be extremely valuable for those in dire circumstances. After all, once there is a plan of action, climbing out of a hole can actually be easier than fighting your way out without any idea of where to go next. For the new executive director, no matter what shape the organization is in, the first thing that should be done is to see if the answers to the five questions exist. If the answers aren’t there, get them quickly. Form follows function in Results Now. Instead of the old “We’ve always done it this way,” you build the plan around the order of the five questions. As such, Results Now is big-picture first, details next, and inherently optimistic about the future. Since the success measures from the strategic plan are tied seamlessly to the operations plan, where real people have bottom-line responsibility and authority for implementation, a feedback loop exists that keeps excess optimism in check. The Results Now master plan can be upbeat about where to go tomorrow while at the same time absolutely down-to-earth realistic about what gets done today. Furthermore, the success measures provide glue that holds things together from front-line staff to executive director to board member, and thereby diminishes the chance that the master plan will end up on a bookshelf or as a doorstop. And isn’t using the plan in the here and now the ultimate test of an effective planning process?

Chapter = c03

Date: Dec 13, 2010

Time: 11:54 am

Chapter = c02

Date: Dec 7, 2010

Time: 8:34 am

PART

II

Purpose He who has a why to live for can bear almost any how. —Friedrich Nietzsche

OPERATING PLAN STRATEGIC PLAN What gets done today? Where to go tomorrow? Goals Lines of Business Budget Success Measures Vision PURPOSE

Why? Delegation Who does what? Duties Guidelines

Accountability When did it happen? Agendas Assessments

GOVERNANCE PLAN

I

n the opening credits of Jerry Maguire, Tom Cruise’s character creates a new mission that sets the stage for the rest of the film. As a cutthroat executive in a sports management firm that handles the careers of top athletes, Jerry experiences a crisis one night on the road at an NFL owners’ meeting in Palm Desert. On this sleepless night, Jerry reflects on his life and a variety of incidents, including the star player who signs only his sponsor’s brand of baseball cards, the young son of an injured football player who calls Jerry out for not protecting his concussion-prone dad, and the high-profile player whose indiscretions Jerry blithely spins away. When Jerry totals up his life’s work, he comes up short, “In the quest for the big dollars, a lot of the little things were going wrong. . . . Who had I become, just another shark in a suit?”1 The answer to his sleepless night of self-reflection is a new mission for Sports Management International, a company made up of “thirty-three out-of-shape agents guiding the careers 37

Chapter = c02

38

Date: Dec 7, 2010

Time: 8:34 am

Purpose

of 2,120 of the most finely-tuned athletes alive.”2 The mission is straightforward: “Caring for them, caring for ourselves, and the games.”3 There are many top managers and managers in organizations who honestly believe that the key motivator in the workplace is pay. You may know some of these people. “I remember when a person got a dollar for a dollar’s work,” they say. “Their paycheck is enough motivation.” However, while money is a consideration, it is not as important for many. Daniel Pink, for example, says that it takes three things to motivate most people in the workplace: “(1) Autonomy—the desire to direct our own lives; (2) Mastery—the urge to get better and better at something that matters; and (3) Purpose—the yearning to do what we do in service of something larger than ourselves.”4 What can be missed in this is the obvious fact that purpose-driven people need a purpose. They need to have it reinforced on a regular basis. When new employees are recruited to the agency, they need to be given a clear understanding of the purpose and how important they are to helping deliver on it. This section contains two chapters. The first chapter is about the values that guide conduct. The second chapter concerns the mission that addresses customers, the difference to be made in their lives, and how the organization is different from its rivals.

Chapter = c04

Date: Dec 7, 2010

Time: 6:6 pm

CHAPTER

4

Values If you plant “Crab” apples, don’t count on harvesting “Golden Delicious.” —Folk saying

P

ick up the newspaper any day or go to the web and there will be some sort of revelation about values at work in society. Just in time for the winter holidays a few years back, many newspapers picked up an Associated Press article about a survey of 29,000 high school students in which 30 percent admitted stealing from a store within the past year, 8 in 10 had lied to a parent about something significant, and 2 in 3 had cheated on a test. Surprisingly, nearly all of the participants were satisfied with their personal ethics and character, and 3 in 4 said that they were better than most when it came to doing what is right.1 Though some might see these illustrations as a rather dour commentary on the moral fabric of our society, others call it business as usual. In an interview with Richard Dawkins, author of The Selfish Gene, Terry Gross, host of NPR’s Fresh Air from WHYY, asked why we haven’t evolved more, from a moral standpoint. Dawkins responded, “The question is the other way around. If you look at the selfish gene view of life, the question rather is why we are as moral as we are.”2 Beginning an introduction to values with such gloom and doom is fairly typical. Joanne Ciulla begins her 1995 book, Ethics, the Heart of Leadership, by saying, “We live in a world where leaders are often morally disappointing.”3 Linda Trevi˜no and Katherine Nelson open their 2007 Managing Business Ethics similarly, “The popular business press is replete with feature stories describing ethical meltdowns and how those corporate misdeeds have eroded the public trust.”4

39

Chapter = c04

Date: Dec 7, 2010

40

Time: 6:6 pm

Purpose

Bill George, former CEO of Medtronic, begins his 2003 Authentic Leadership succinctly with “Thank you, Enron and Arthur Anderson.”5 Thomas Jones’s 1991 top-ten-most-cited paper on ethical decision-making opens with the following: Reasons for increased societal focus on ethics in organizations are many. Insider trading on Wall Street, defense contractor scandals, involving both private and public sectors, rental car repair overcharges; and the resignation of over 100 Reagan administration officials have helped keep ethical issues in the public eye.6 Were it not for the reference to Reagan, this introduction would be as relevant today as it was 16 years ago. Unfortunately, results from the 2007 National Business Ethics Survey (NBES) compiled by the Ethics Resource Center suggest that things have gotten worse: Ethical misconduct in general is very high and back at pre-Enron levels—during the past year, more than half of employees saw ethical misconduct of some kind. Many employees do not report what they observe—they are fearful about retaliation and skeptical that their reporting will make a difference. In fact, one in eight employees experiences some form of retaliation for reporting misconduct. The number of companies that are successful in incorporating a strong enterprise-wide ethical culture into their business has declined since 2005. Only nine percent of companies have strong ethical cultures.7 Fortunately, the 2009 NBES shows a marked improvement in most measures, although it comes with a warning: “The lesson for organizations is that, when more settled, prosperous times return, misconduct is likely to creep upward again.”8

Getting Real The common response to news like this is to extol the virtues of valuecentered leadership, which many executives say is “simply a matter of leaders having good character. By having ‘the right values’ or being a person of ‘strong character,’ the ethical leader can set the example for others and withstand any temptations.”9 Joe Badaracco describes how this conventional approach works: They stress the purity of leaders’ motives, their unfaltering dedication to high aims and noble causes, and their willingness to challenge the system. At best, these stories provide inspiration and guidance. At worst, they offer

Chapter = c04

Date: Dec 7, 2010

Values

Time: 6:6 pm

41

greeting card sentimentality in place of realism about why people do what they do. They also tell people with mixed and complicated motives that they may be too selfish, divided, or confused to be “real” leaders.10 Edward Freeman, ranked 39th on Ethisphere’s list of the 100 most influential people in business ethics,11 responds to those who practice greeting-card ethics by saying the “reality of ethical leadership is far more complex and the stakes are much higher.”12 Linda Trevi˜no and Michael Brown agree, and especially so when it comes to decision-making: Ethical decisions are ambiguous, and the ethical decision-making process involves multiple stages that are fraught with complications and contextual pressures. Individuals may not have the cognitive sophistication to make the right decision. And most people will be influenced by peers’ and leaders’ words and actions, and by concerns about the consequences of their behavior in the work environment.13 One of the key findings in the 2007 NBES was that “ethics risk diminishes when a company adopts an enterprise-wide cultural approach to business ethics,”14 which has four key elements: 1. Ethical leadership: tone at the top and belief that leaders can be trusted to do the right thing. 2. Supervisor reinforcement: individuals directly above the employee in the company hierarchy set a good example and encourage ethical behavior. 3. Peer commitment to ethics: ethical actions of peers support employees who “do the right thing.” 4. Embedded ethical values: values promoted through informal communications channels are complementary with a company’s official values.15 Culture “refers to the taken-for-granted values, underlying assumptions, expectations, collective memories, and definitions present in an organization. It represents ‘how things are done around here.’”16 For Edgar Schein, culture comes in three levels.17 At the first level are artifacts, the things that outsiders can observe about an organization like the pictures on the walls or the office space itself. The second level is the espoused values, verbal and written expressions of what is important in the organization, things such as teamwork, integrity, and commitment to customer service. Level three—the deepest—is what happens when espoused values become taken for granted, when they become basic underlying assumptions. Although all three levels are important, perhaps the second level— espoused values—is the more so because, unlike artifacts and basic underlying assumptions, “when people publicly espouse a particular point of view, they become much more likely to behave consistent with that point of view

Chapter = c04

Date: Dec 7, 2010

Time: 6:6 pm

42

Purpose

even if they did not previously hold that point of view.”18 In other words, the talk before the walk. There are various methods for ensuring that values become part of the organizational culture. Gary Yukl sees two primary ways that leaders can shape the ethical culture of an organization: Promoting an Ethical Climate ■ ■

■

■ ■ ■ ■

Set an example of ethical behavior in your own actions. Facilitate the development and dissemination of a code of ethical conduct. Initiate discussions with followers or colleagues about ethics and integrity. Recognize and reward ethical behavior by others. Take personal risks to advocate moral solutions to problems. Help others find fair and ethical solutions to conflicts. Initiate support services (e.g., ethics hotline, online advisory group).

Opposing Unethical Practices ■ ■ ■ ■

■ ■

■

Refuse to share in the benefits provided by unethical activities. Refuse to accept assignments that involve unethical activities. Try to discourage unethical actions by others. Speak out publicly against unethical or unfair policies in the organization. Oppose unethical decisions and seek to get them reversed. Inform proper authorities about dangerous products or harmful practices. Provide assistance to others who oppose unethical decisions or practices.19

No statement of organizational values is of benefit to any company if it is not kept alive through promoting the values that will certainly embrace ethical matters and the opposing of practices that do not adhere to the values. In other words, it is easy to clarify the values; the hard work is living them and responding appropriately to exceptions.

Talk that Walks Walking your talk—living your values—is akin to authenticity, which means “owning one’s personal experiences, be they thoughts, emotions, needs, wants, preferences, or beliefs [and acting] in accord with the true self, expressing oneself in ways that are consistent with inner thoughts and feelings.”20 Other descriptions of authentic include “genuine, reliable,

Chapter = c04

Date: Dec 7, 2010

Values

Time: 6:6 pm

43

trustworthy, real, and veritable”21 and “to know, accept, and be true to one’s self . . . they know who they are, what they believe and value, and they act upon those values and beliefs while transparently interacting with others.”22 Fred Luthans and Bruce Avolio observe that authentic leaders “lead from the front, going in advance of others when there is risk for doing so. . . . Such ‘walking the talk’ has been shown to be much more effective in influencing others than coercing or persuading.”23 Indeed, there is evidence that trust is significantly related to performance24 and an important source of competitive advantage.25 James Kouzes and Barry Posner make use of the phrase model the way and say, “Exemplary leaders go first. They go first by setting the example through daily actions that demonstrate they are deeply committed to their beliefs.”26 Your talk ultimately refers to your values, which are like your car in that no matter where you are, what road you’re on, where you’re headed, or who’s in the car with you, the car stays the same. Jim Collins and Jerry Porras defined values in their best-selling Built to Last as the “organization’s essential and enduring tenets, not to be compromised for financial gain or short-term expediency.”27 Why should we care about having a clear set of values anyway? First, how can you test your actions against your values or those of your organization when you don’t know what they are in the first place? How can you “walk your talk” if you don’t know what the talk should be? How can you “lead by example” if you don’t know the example you are trying to set? That not everyone shares the same values should be obvious and is illustrated by lack of insight shown in a quote attributed to Alexander Wiley about how to solve the Mideast problems, “The Jews and Arabs should settle their dispute in the true spirit of Christian charity.”28 The fact is that in an increasingly diverse workplace, people grow up in different environments with different values. Obviously, people look at the world differently, and there are frequently few bridging devices such as religion to provide a common vocabulary. Whether we like it or not—and we often don’t like it—many of the conflicts between people occur as a result of values clashes. These differences occur not only with customers and clients, but also with employees and family members. It is all about the assumptions we make. I assume that my 17-year-old son has the very same perspective I have when it comes to taking responsibility. I assume that our marketing director shares my dedication to serving school audiences when, in fact, she’s dedicated to the customer who pays $115 a seat for Wicked, not the kids who come for free. Expecting people to know your values without espousing them is values by clairvoyance. This makes an assumption that you know what my values are, that you respect my values, that you care about them. Leadership frequently falls into this trap. Leaders seem to believe that others can read their minds when it comes to values, that others should know that lending a hand

Chapter = c04

Date: Dec 7, 2010

Time: 6:6 pm

44

Purpose

without asking is important and it should be done. It just doesn’t work this way. Employees are not mind readers. If the leaders of the nonprofit organization want certain values embraced in the workplace, they need to spell them out explicitly, promote them throughout the organization, model the values, and take action if the values are not being observed. The challenge to values is that they are frequently given lip service as a fad of the day. You’ll come into the office one day and find that a manager has put up a framed picture of an eagle soaring in the mountains with a pithy saying about teams. That’s not the same as clear and concretely articulated values that are lived and enforced. Second, organizational values often contain a kernel of competitive advantage, which is what makes you different from your rivals. The important things to people in organizations often are matters of the heart, and this often gives you the edge in an increasingly competitive environment for nonprofits. If making your clients healthy is a hill you intend to die on, as the saying goes, consider it a value because it is an enduring tenet of how you do business and “not to be compromised for financial gain or short-term expediency.”29 Third, because organizational values are so important to people, they offer you an immediate tool to use in judging the appropriateness of everything you do. A faith-based organization with a value to protect the sanctity of their house of worship may want to reconsider hosting the movie club that shows R-rated films in the church basement. Table 4.1 lists five organizational values of an agency helping students get ready for college that were generated in about 20 minutes using the BAM process (brainstorming, affinity grouping, and multivoting) shown in Appendix A. TABLE 4.1 College Preparation Agency Values Ideas

Results

– Makes sense, effective, real, achievement, results driven, seamless, consistent, aligned purpose, high-performance organization, rigor, focus, sustainable, fundable, doable financially, cost effective (47) – Child centered, global, student input (19) – Integrity, equitable, accountability, transparent (15) – Passionate, motivating, engaged, high expectations (13) – Buy-in, inclusive, shared responsibility, collaborative, shared belief, synergy (9)

Effective

Child Centered Trustworthy High Expectations Collaborative

Note: Numbers in parentheses are results of a multivoting rating process where participants could vote $3, $2, and $1 in any combination for their highest-rated grouping of ideas; higher numbers = higher rating.

Chapter = c04

Date: Dec 7, 2010

Time: 6:6 pm

45

Values

TABLE 4.2 Management Service Organization Values Values

Results

– Collaboration, team players 1. Collaborative – Optimistic, excited, well intentioned, positive, enthusiastic, a. Optimistic energetic b. Cooperative – Cooperative c. Effective – Good communicators, open, effective communication, communicators shared information, shared goals, share information, diverse, flexible – – – – –

Innovative, cutting edge, ingenious, progressive 2. Innovative Proactive, change oriented, risk takers, risk tolerant a. Proactive Experimental, experimenting, share it, present new ideas b. Experimental Persistent, comfortable being wrong c. Persistent Continuous learning, expand education experience, think d. Continuous outside the box, open to new ideas, open-minded, learners creative, initiative, willing to learn, flexible

– Customer centered, service oriented, user friendly, community oriented, concern for community, customer focused, asset to nonprofits – Respectful, show you care, truthful – Responsive to needs, attentive, listen to customer, timely – Above and beyond, solution driven, asking, solve problems, value adding, provide quality, provide added quality

3. Customer centered

a. Respectful b. Responsive c. Solution driven

– Professional, quality, competent, excellence 4. Professional – Results driven, execute effectively, have standards, results a. Results driven oriented, provide value – Thorough, dedicated, committed, hard work, loyal to b. Dedicated mission – Knowledge based and experienced, resourceful, works c. Knowledge and with knowledge, committed to evidence-based practice, experience knowledgeable, know the business based – – – –

Accountable for actions, integrity, trustworthy Fair, consistent, objective Transparency, sharing information Positive, negative feedback; make problems known; honest – Keep confidences, straightforward, keep commitments, above-board, keep word

5. Trustworthy a. Fair b. Transparent c. Truthful d. Promise keepers

Chapter = c04

Date: Dec 7, 2010

Time: 6:6 pm

46

Purpose

Most organizations go further and clarify the values more specifically. Table 4.2, for example, lists the organizational values of a management service organization. The five “buckets” of organizational values—collaborative, innovative, customer centered, professional, and trustworthy—might be considered organizational values, but they are of very little use until the guidelines are clarified. These can easily be crafted into an overarching statement of organizational values: ■ ■

■ ■

■

We are collaborative: optimistic, cooperative, effective communicators. We are innovative: proactive, experimental, persistent continuous learners. We are customer centered: respectful, responsive, and solution driven. We are professional: results driven, dedicated, and knowledge-andexperience-based decision makers. We are trustworthy: fair, transparent, truthful promise keepers. Now that’s talk that you can definitely walk!

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

CHAPTER

5

Mission Starting with the mission and its requirements is the first lesson business can learn from successful nonprofits. —Peter Drucker1

hat mission is considered a sine qua non of high-performing nonprofits is not in debate; Peter Drucker, for example, says it is the first thing that for-profits can learn from nonprofits, and here’s why:

T

It focuses the organization on action. It defines the specific strategies needed to attain the crucial goals. It creates a disciplined organization. It alone can prevent the most common degenerative disease of organizations, especially large ones: splintering their always limited resources on things that are “interesting” or look “profitable” rather than concentrating them on a very small number of productive efforts.2 Paul Light, in his study of innovative nonprofit and government organizations, also found this pragmatic nature of mission, “Without a strong sense of mission, nonprofit and government organizations cannot long sustain innovativeness. They will have no basis on which to say either yes or no.”3 Take malfunctioning teams for example. When things go wrong, people often search for the root causes of the difficulties. Carl Larson and Frank LaFasto can save you time with their analysis: “In every case, without exception, when an effectively functioning team was identified, it was described by the respondent as having a clear understanding of its objective . . . and the belief that the goal embodies a worthwhile or important result.”4

47

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

48

Purpose

Besides the benefit of giving focus, a well-constructed mission is the first step of the strategy stairway that leads ultimately leads to boots-on-theground programs. Mission is also valuable as the “sex drive of organizations,”5 says Christopher Bart. James Phills, director of the Center for Social Innovation at Stanford explains: “The function of a mission is to guide and inspire; to energize and give meaning; and to define a nonprofit and what it stands for.”6 Kasturi Rangan writes, “Most nonprofits have broad, inspiring mission statements—and they should. . . . After all, the mission is what inspires founders to create the organization, and it draws board members, staff, donors, and volunteers to become involved.”7 A fourth benefit of a well-crafted mission is to “distinguish one organization from other similar enterprises”8 that “reveals the image the company seeks to project, reflects the firm’s self-concept.”9 As such, it becomes a repository of what the organization sees as its competitive advantage. A fifth benefit is for communication: “In just a few sentences, a mission statement should be able to communicate the essence of an organization to its stakeholders and to the public: one guiding set of ideas that is articulated, understood, and supported.”10 It’s not just nonprofits that make good use of mission statements. Jim Collins and Jerry Porras assert that the mission, which they call a firm’s core ideology, is an essential element of successful visionary companies.11 Lending credence to this view is the news that mission statements are the number three management tool for two-thirds of global firms.12 Little wonder given the evidence of the relationship between mission statements and financial performance.13 In sum, the mission is the bedrock of a nonprofit organization. It is the fundamental element of a nonprofit organization’s success. It is the organization’s reason for being, the why of its existence. The mission drives all of the other aspects of the organization, its activities, and its governance and management structure. The mission takes a global view of the organization. With a properly crafted mission, the organization has driven a stake in the ground that can provide an extraordinary amount of guidance in decision making at many levels of the organization. A mission focuses the organization and gives people the cause they so fervently need. A well-crafted mission addresses three questions: 1. Who are our customers? 2. What difference do we make? 3. How are we different from our rivals? Notice that the verbs in these questions are present tense. As such the mission statement is about what you are doing in the here and now; it is

Chapter = c05

Date: Dec 13, 2010

Mission

Time: 11:57 am

49

not about where you’re going in the future. In other words, a mission is not strategy; a mission is not the organization’s vision for the future. A mission is in the present tense and describes the why of the organization; strategy is future oriented, the where are we going. As James Phills puts it, “mission, no matter how clear, compelling, or poetic, won’t ensure economic vitality. That is the job of strategy.”14 This doesn’t mean that mission doesn’t have an impact on the future. Of course, it does; it defines the work of your organization. As you review your mission with the three questions, you may decide that what you are actually doing now isn’t exactly what you should be doing. This can have significant ramifications; it can take real effort and time to achieve the present tense of a mission. Remember the story about the eating an elephant, the one where the best way to do it is one bite at a time? No wonder that two of Fortune’s most powerful women entrepreneurs, Susan Walvius and Michelle Marciniak, say that the best advice they ever received was “crawl, walk, and then run.”15 Jerry Maguire’s new mission for Sports Management International was quite simple: caring for them, caring for ourselves, and the games. As a testament to right time and wrong place, two weeks later he is sent packing for the greener pastures of entrepreneurial start-ups. In the long run, Jerry’s start-up succeeds well beyond everyone’s expectations. He not only wins the game, but he also wins the “You complete me. . . . You had me at hello” girl (played by Renee Zellweger) and her adorable son (played by Jonathan Lipnicki). What’s not to love about the perfect blend of sports and romance? That’s the power and focus of a great mission!

Customers By beginning mission with the question of customers, you ensure that they are its focus. Though this is a truly elemental foundation of successful businesses, it is often neglected and deprives the organization of the very focus it needs to be successful. No organization can ever do wrong by focusing first on customers. As Harvey Mackay, the author of five business bestsellers, so aptly says: Successful organizations have one common central focus: customers. It doesn’t matter if it’s a business, a hospital, or a government agency, success comes to those, and only those, who are obsessed with looking after customers. This wisdom isn’t a secret. Mission statements, annual reports, posters on the wall, seminars, and even television programs all proclaim the supremacy of customers. But in the words of Shakespeare, this wisdom

Chapter = c05

50

Date: Dec 13, 2010

Time: 11:57 am

Purpose

is “more honored in the breach than the observance.” In fact, generally speaking, customer service, in a word, stinks. What success I’ve enjoyed in business, with my books, my public speaking, and the many volunteer community organizations I’ve worked for, has been due to looking after customers—seeing them as individuals and trying to understand all their needs.16 Even with all the evidence, many worry that if a specific customer is defined, it will be limiting to the scope of activity. Unfortunately, no organization can be all things to all people, and defining the customers to be served makes it possible to concentrate effectively. The key issue is to answer the question with authority and explicitness. Youth and children is a good start for a customer description at a Big Brothers–Big Sisters chapter, but 7- to 13-year-old children from at-risk, single-parent households is much better because it gives more usable information for the construction of lines of business in the near term and for ensuring accountability later on. Peter Drucker’s five-question protocol for evaluating “what you are doing, why you are doing it, and what you must do to improve”17 begins with mission and is immediately followed by “Who is our customer?”18 He gets at the answer by addressing the following two relevant topics: “Who is our primary customer? Who are our supporting customers?”19 He defines the two types of customers this way: The primary customer is the person whose life is changed through your work. Effectiveness requires focus, and that means one response to the question. . . . Supporting customers are volunteers, members, partners, funders, referral sources, employees, and others who must be satisfied.20 The most important aspect of the customer question for Peter Drucker is that it is “very tempting to say there is more than one primary customer, but effective organizations resist this temptation and keep to a focus—the primary customer.”21 There are a great many ways to get at the answer to the many questions posed by Results Now. The one used most frequently is the brainstorming, affinity grouping, and multivoting (BAM) rating process discussed in Appendix A. Whatever process you use, if you are going to work with a group of people, the only “no-matter-what” recommendation is to avoid wordsmithing. Wordsmithing is best left for later to a capable person or crew and then reviewed and revised. Using BAM with a group including 23 board and staff members from a faith-based outdoor camping agency yielded the results shown in Table 5.1 in about 25 minutes including discussion.

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

51

Mission

TABLE 5.1 Camping Agency Mission Primary Customer Ideas

Results

– Youth in our community, schools, other youth groups, future business leaders (63)22

Youth in our community (ages 7 to 20)

Ideas not chosen – – – – – – – –

Adult leaders, counselors, volunteers, board (26) Donors, foundations, contributors (23) Parents, families (8) Mankind, stakeholders, society values, society, communities (4) Community organizations, community ambiance, churches, community at large, penal institutions (2) Character organizations (1) National office Local businesses

Notice in the table the demarcation line between the first and second grouping. Below that line are all of the groupings that were “left off the table” after a discussion about the grouping that truly represented the Primary Customers.

Difference The typical mission statement tells us all about the products and services provided by the organization; its essence is about the agency and not the customer: “Here are the products we sell” is the key message. What the mission should do is say what difference the agency makes in the lives of its customers. What’s changed in that person as a result of the interaction? Whether it is health restored for a cancer patient or well-adjusted families for a family-service agency, the difference is what the customer will experience and should always have a texture of a final destination. The difference for the customer frequently describes why the organization exists, its reasons for being in business in the first place. The difference should always be crafted in the context of the customer, not the organization. What is different for the customer is the question to be answered, not what product will be delivered by the organization. At the mission level, the difference is global, and it is uncommon to see more than one or two. Later on in the process, more detailed customer differences are articulated to form lines of business, which are the agency’s products, services, and programs.

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

52

Purpose

Life at its fullest is an example of a customer difference for a person affected with multiple sclerosis. A performing arts center could easily consider an enriched life as a viable customer difference. After all, the customer isn’t going to the theatre to just see a play or hear a symphony. The performance itself is actually a means to an end. The performing arts center might use standing-ovation experiences as a statement of what difference the organization makes for its customers. A Multiple Sclerosis Society chapter will certainly produce programs to help the newly diagnosed, update education to keep those afflicted current, funding for research, direct disbursements for those without means, and support groups to help people network with each other. Not one of these programs and services belong in a mission statement because they do not answer the question of what difference. These are all about what the chapter does, what it makes, what it sells, its lines of business. The chapter’s “what difference do we make” is best described as life at its fullest for people affected by multiple sclerosis. Once this is defined, programs and services that make up the lines of business of the organization become easier to formulate. A chamber of commerce at first responded to the question of difference with providing information and referral services to business, group purchasing opportunities, business counseling and education services, and programming. This does not answer the difference correctly because it TABLE 5.2 Camping Agency Mission Difference Ideas

Results

– Character, relationship with God, sense of honesty, values, value system, integrity (40) – Skill set for life, success in life, experience, special skills, well rounded (30)

Character centered

Ideas not chosen – Experience leadership at younger age, career path, learn to take initiative, structure (20) – Self-confidence, self-reliance, pride in yourself, confident in skills, higher self-esteem (15) – Fun, sense of adventure, drug avoidance, travel (15) – Personal accountability, take responsibility, maturity (3) – Support network, friendship, teamwork, respect for others, get along with others, male role model (1) – Accomplishment, planning skills, goal driven, recognition motivation

Skills for life

Chapter = c05

Date: Dec 13, 2010

Mission

Time: 11:57 am

53

is about the programs and services that the chamber provides, not about what difference it made for its customers. It is better for the chamber to first determine what difference it intends to make for its customers before it moves to the strategies that will cause that difference to happen. That’s why a difference of making member businesses more profitable was chosen. Save the Children’s difference is to make lasting positive change in the lives of disadvantaged children. While this is very broad and some might prefer more definition, this clearly is a properly crafted difference statement and one that can give rise to significant strategies that can bring it about. A Big Brothers–Big Sisters chapter difference is to build confident, competent, and caring young adults. Put directly, a mission statement should never include the programs of the agency; it should include the difference it makes in the lives of its customers as the results for the outdoor camping agency (shown in Table 5.2).

Advantage The third question in crafting the mission is about the advantage that your organization has over its rivals. What edge will the company have that other organizations cannot match? The question is embodied in John Pierce II and Fred David’s recommendation that the effective mission “defines the fundamental, unique purpose that sets a business apart from other firms of its type.”23 A Girl Scout council might choose scouting for all girls as an answer, thereby defining inclusiveness as a core theme. An agency with the difference of putting the American dream of a home within reach for people with low to moderate incomes decided that being the go-to organization was its advantage. No other agency in the community would be able to match its position for one-stop shopping, for the breadth of its knowledge and services. Every organization has a choice in what it becomes known for, its reputation, if you will. This choice is about the edge that the organization will have over all others like it, the defining quality of its work. What do we want to be known for, respected for? A Big Brothers–Big Sisters chapter chose professionally supported one-to-one matches that deliver results. There are other mentoring programs in the community, but none that can match the professional support and the results that are delivered. Ultimately, how you are better than your rivals is your competitive advantage. Competitive advantage is the “presence of visible, obvious, and measurable ways in which your organization differs from and is better than its peers.”24 And you want that advantage to be sustainable over time

Chapter = c05

54

Date: Dec 13, 2010

Time: 11:57 am

Purpose

because your organization can “outperform rivals only if it can establish a difference that it can preserve.”25 Why should you care about your advantage? Though you might believe you’re special, your customers, stakeholders, and especially funders may respectfully disagree. When reviewing your appeal, they may see you as a lot like your peers. And if there’s no discernable difference, you may end up on the short end of the stick. As painful as it may be to learn, in the words of David La Piana and Michaela Hayes, “Foundations tend to see more proposals each year from nonprofits that, from their perspective, look alike. . . . Unfortunately, if there is one belief that all funders share, it is that all nonprofits are the same.”26 I ran a performing arts center for 15 years; I was its first full-time executive director in all my wet-behind-the-ears glory. In the first few days at my new job, I was overwhelmed by the sheer magnitude of problems surrounding the imminent move into a newly restored theatre circa 1866. From the installation of seats to the repair of the mighty Wurlitzer organ that had been left out in the rain, I hardly had time to think about where the organization should be going in the future. My answer to “What’s the plan?” was “What plan?” Despite the intense activity, we (the board and top staff members) could not dodge decisions that would have a long-term impact on the company. One way or another, we had to have some idea of the direction that the organization should move. We had to decide what shows would be chosen for the season coming up nine months later; technology systems and offices had to be furnished with some idea of what work would be done. For example, did we need two incoming phone lines to the box office or 20? “What’s the plan?” became an immediate question that had to be answered. That’s why the only order of business at my first board meeting was answering the question of mission. Our efforts then were crude compared to what we later used, but I vividly recall the long and hard debate about whether the organization was going to be “a” regional performing arts center or “the” regional performing arts center. The discussion about the choice of this single word in the mission statement was dramatic because each word required substantially different levels of risk and effort. One of the hottest shows at the time was Les Mis´erables. It was the “world’s most popular musical” for good reason, but its price tag matched its appeal. The choice of whether to do the show instead of something less risky literally hinged on the decision between “a” and “the” in the mission statement. You’d think that booking a show like Les Miz is a no-brainer, but the cost of doing it in my first full season was equal to our entire budget for the one just ended. That’s called a white-knuckle ride, betting the ranch, burning your boats.

Chapter = c05

Date: Dec 13, 2010

Mission

Time: 11:57 am

55

The vote to go with “the” was not easy, but the board knew the risks and it was firmly unanimous in the roll call. At the time, I didn’t have a clue about competitive advantage, but what that one little word meant was that we were going to be best and that meant shows like Les Miz were must-do. And because we all admired L.L. Bean’s approach to customer service, we decided that standing ovation experiences was also going to be part of our advantage. Now a competitive advantage wouldn’t be worth much if it only distinguished you from others; it has to make you better than your rivals; it has to achieve synergy with your efforts to achieve operational excellence. A focus on the customer certainly did both for our small nonprofit performing arts center, which, way back in 1990, had a budget of $500,000, give or take, and just 2,250 Broadway subscribers. A year after Les Miz, we had 8,000, and for the last 10 years of my tenure, we ran at about 15,000, which was capacity for our theatre. The total audience attending events in our buildings, including a brand-new $130 million performing arts center complex, grew from 22,000 to over 900,000 while revenues under management went up 21-fold to $21 million. Do I seriously attribute our success to a competitive advantage of being the regional performing arts center with standing ovation experiences? In fact, I do. Les Miz was a great beginning, but it wasn’t enough; we had to execute effectively, and we had to be different from our rivals, including other arts organizations, entertainment options like movies and television, and the whole wide world of nonprofits that were at the funding table next to us. What happened was that we (board and staff together) decided on “the” over “a,” which meant we wanted to be the best. That got us over the first big Les Miz hurdle that in turn allowed us to strengthen standing ovation experiences. This in turn built loyalty with our customers of such a depth that a bad show (or two) wouldn’t keep them from coming back. And come back they did, over and over and over. Were we especially brilliant for picking customer service as part of our advantage? Honestly, it’s a pretty good idea for any business simply because “complete customer satisfaction is the key to securing customer loyalty and generating superior long-term financial performance.”27 Indeed, some experts say that a commitment to loyal customers is “the acid test of leadership [because] long-term rewards of loyalty ultimately outstrip even the most spectacular short-term profits.”28 How do you find your competitive advantage, the difference that can set you apart from others? Expert David La Piana recommends one way to go about it: ■

Using a unique asset (such as a strength that no other similar organization in your geographic area has), and/or

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

56

Purpose

■

Having outstanding execution (such as being faster or less expensive, or having better service, than other similar organizations in your geographic area)29

It’s a bit like being in your own restaurant and deciding from the menu what dish will become your signature. Take an inventory of what you have or what you can do, make a decision, and run with it. A more linear approach undertakes an analysis of resources (tangible and intangible), capabilities, core competencies (valuable, rare, costly to imitate, and nonsubstitutable) to identify your competitive advantage.30 My experience with the regional performing arts center with standing ovation experiences was much less formal; we liked L.L. Bean and, in a sense, we stole the idea from them. As the saying goes, imitation is the sincerest form of flattery. Yet another way to find your agency’s competitive advantage is to think of the values that are most important to you, the ones that you would not forsake for any reason. For me, it was making our customer the star; for you, it might be delivering real results, lowest costs, or highest quality. TABLE 5.3 Camping Agency Mission Advantage Ideas

Results

– Delivers skills for life, everyone succeeds, strong rank advance program, long-term relationships (34)

Everyone succeeds

Ideas not chosen – For any kid, at-risk urban youth, urban activities, buddies, geographic diversity, wide range of ages, flexibility for kids, special needs (19) – Values-driven programs, trust, history, reputation (19) – Programs–programs–programs, order of the arrow, comprehensive, well-rounded (16) – Strong leader training, real leadership program only one, boy-run, active engaged adult leaders (15) – Fun, opportunity for travel, excitement, summer camp experience, high adventure program (14) – Financial stability, do all kinds of things, high annual giving (3) – Well organized, recruiting methods, effective marketing (7) – Strengthen programs of churches and sponsors (0)

Chapter = c05

Date: Dec 13, 2010

Mission

Time: 11:57 am

57

Although some organizations have multiple advantages, I recommend trying to have as a few as possible. It’s hard enough for folks in your agency to remember the mission, let alone how you’re going to be better than rivals. If you focus on one advantage and pound away at it, you just might pull it off. Table 5.3 shows the results from the outdoor camping organization.

Sweet Spot In his popular book on motivation, David Pink uses the question, “What’s your sentence?” to clarify the need for succinct yet powerful mission statements: In 1962, Clare Boothe Luce, one of the first women to serve in the U.S. Congress, offered some advice to President John F. Kennedy. “A great man,” she told him, “is one sentence.” Abraham Lincoln’s sentence was: “He preserved the union and freed the slaves.” Franklin Roosevelt’s was: “He lifted us out of a great depression and helped us win a world war.” Luce feared that Kennedy’s attention was so splintered among different priorities that his sentence risked becoming a muddled paragraph.31 When you’ve answered the three questions, you will have a mission statement that becomes the sweet spot of your Results Now master plan, that one sentence that Dan Pink refers to. As simple as it sounds, constructing a great mission is a matter of putting your answers to the three questions together in a way that works for you. The mission of the outdoor camping organization is a place for youth in our community where everyone succeeds with character-centered skills good for life. Notice in this statement that there is nothing tentative about everyone succeeds; it doesn’t say that the agency helps, assists, tries to be sure. John and Miriam Carver say that words like this “can be fulfilled while having absolutely no effect upon consumers. Be tough; allow yourselves and your CEO no points for supporting, assisting, or advocating; rather, hold yourselves to the discipline of requiring results for people.”32 People working on the mission statement sometimes struggle with letting go of old mission statements. They like the feel of the words or the historical context. There is no issue with using previously created mission statements provided that the mission explicitly addresses the three questions with authority. Take the comparison of before and after mission statements from a Big Brothers–Big Sisters chapter shown in Table 5.4.

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

58

Purpose

TABLE 5.4 Old versus New Mission Old Mission

Mission Element

New Mission

Children and youth

Summary Who

Building young adults 7- to 13-year-old children from at-risk, single-parent households

Committed to making a positive difference, assist them in achieving their highest potential, grow to become confident, competent, and caring individuals

What difference

confident, competent, and caring young adults

primarily through a professionally supported one-to-one relationship

How different

professionally supported one-to-one matches that deliver results

Complete Statements Old Mission

New Mission

Committed to making a positive difference in the lives of children and youth, primarily through a professionally supported one-to-one relationship, and to assist them in achieving their highest potential as they grow to become confident, competent, and caring individuals.

Building 7- to 13-year-old children from at-risk, single-parent households into confident, competent, and caring young adults through professionally supported one-to-one matches that deliver results

Which of the two mission statements is better? The new mission has the edge because it offers more specific information to inform decisions. Moreover, less is more; definite is better than ambiguous. Of course, most missions like the one for Big Brothers–Big Sisters are not short enough to be easily recalled, which is why you need to work on the “T-shirt” mission. The mission summary has great value to the organization, especially for people who will be doing the work. Even at 40 words, a mission statement is difficult to remember. The mission summary takes the most important feature of the mission and distills it down into just a few words. It can become a rallying point for decision making; it can be a constant reminder to board members, staff, and volunteers about the organization’s mission. It goes on the bottom of stationery, on business cards, and on T-shirts. For the Big Brothers–Big Sisters chapter, the mission summary is Building Young Adults.

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

Mission

59

If an organization lives with the summary long enough, the odds are good that everyone close to the organization including its customers will know the mission summary and hold the organization accountable to it. At that point, the organization will have become truly mission centered. Someone, somewhere, will need to make a decision, and they will recall that four- or five-word statement mission summary, it will give them guidance, and they will make the right decision aligned with that statement. There is no way this will happen with a 40-word statement, but it can and does happen with four- or five-word statements that are repeated over and over and over. People helping people in need today is the mission summary of a United Way. Life at its fullest is the summary for the multiple sclerosis chapter. For the outdoor camping agency, it’s Skills good for life. Share Our Strength’s is No Kid Hungry; Outward Bound’s is Challenge yourself. Challenge your world. The Victoria Theatre Association wanted to be the best regional performing arts center with standing ovation experiences and chose You are the star. It was in place for many years, published on T-shirts, jackets, and stationery, and it was prominently displayed in every place imaginable, including tickets and label pins. It was mentioned in curtain speeches and in radio commercials. So well known was this mission summary that customers reminded box office employees or ushers of it if things weren’t up to standard. That’s what it can mean to get the message of a mission out to the community: The customers know the mission and hold the organization accountable to delivering it. In the three examples below of well-constructed missions, most of the elements have been addressed effectively, which provides the necessary information that can bring these missions to life through appropriately developed lines of business: 1. Bringing resources together to help ←Summary We bring resources together ←How better for people in need or at risk ←Who to solve their problems. ←What difference 2. A home within reach ←Summary We are the “go-to” agency ←How better that puts a home within reach ←What difference for people with low to moderate incomes. ←Who 3. You are the star! ←Summary We are the regional arts center enriching life ←What difference for adults, families, and school children ←Who with standing ovation experiences. ←How better

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

60

Purpose

The inescapable concern about these mission statements is whether they are too simple. That the missions are straightforward and elegantly simple is exactly the point. No one benefits from confusion about the mission of the organization. Meaningful action must be driven by an explicitly clear mission. As a core driver of decision making, the complicated mission that no one can recall or understand serves little value to the organization. The simpler the mission, the better, and the more likely it will drive action on the front lines of work. Keep it short and simple, hammer away it at every chance, and the likelihood is that it may actually come to life. If the above examples are not simple or graceful enough for you, you might try crafting your mission statement in Haiku. As Chris Finney explains, “Your organization’s mission statement deserves to be elegant, precise, and even poetic because these words embody the reason your nonprofit exists.”33 Here are some examples that address the three-question mandate in the 17-syllable format of three lines with five, seven, and five syllables: A difference made ←How better Change-ready homeless women ←Who Self-sufficiency ←What difference National leader ←How better At-risk kids and families ←Who To be better now ←What difference How do you know your mission is a good one? According to Peter Drucker, a well-articulated mission: Is short and sharply focused. Is clear and easily understood. Defines why we do what we do, why the organization exists. Does not prescribe means. Is sufficiently broad. Provides direction for doing the right things. Addresses our opportunities. Matches our competence. Inspires our commitment. Says what, in the end, we want to be remembered for.34

Hoop Dreams The power of mission of cannot be overstated, as the shortest NBA basketball player of all time illustrates. Five-foot-three Muggsy Bogues grew up

Chapter = c05

Date: Dec 13, 2010

Mission

Time: 11:57 am

61

in Baltimore’s housing projects. He went to Dunbar High School, where he was frequently laughed at because of his size, although he became the most valuable player in his senior year. At Wake Forest, he led the league in assists and steals in his junior year and made all-conference. He was one of five in Wake Forest history to have his jersey number retired. And he is 5 feet 3 inches tall. For Bogues, it was clear that his mission was to play basketball; that’s how he defined himself. And his vision for bringing this mission to life—what Jerry Porras and Jim Collins call a BHAG (big hairy audacious goal)35 —was to play in the NBA. Never mind that this was a stretch quite literally compared to someone like Yao Ming at 7 feet 6 inches tall. Some would say that you should change your mission if you obviously can’t succeed at it, but before you do that, consider what happened to Muggsy. He figured out how to maximize his assets and create a competitive advantage. Being short is a real plus if you are going to be one of the best ball handlers and stealers in the game. It’s no surprise that his advantage made him one of the NBA’s all-time leaders in the assist (the number of passes that ended up in his team’s hands) to turnover (the number of passes that end up in the opposing team’s hands) ratio. And that’s not all. In fact, Muggsy: ■ ■

■

■

■

In 1999–2000, had a 5.07 assist-to-turnover ratio, first in NBA Notched his 6,000th career point, 6,000th assist, 2,000th rebound, and 1,200th steal during the 1997–98 season Ranks as the Hornets’ all-time franchise leader in assists (5,557) and steals (1,067) and ranks 3rd in points (5,531) Holds the Hornets’ franchise records for most assists in a season (867 in 1989–90), in a game (19, accomplished three times) and in a half (13, against the New York Knicks on 3/27/89) Holds the Hornets’ franchise record for most steals in a season (170 in 1991–92) and shares the record for most steals in a game (7, accomplished twice)36

History is filled with hundreds of wonderful, inspiring stories of people like Muggsy who began with an idea of who they were and not with an appraisal of what they could accomplish. When looking at nonprofits, people see companies characterized by the same sort of courage. Nonprofits go where for-profits wouldn’t dream of going. They drive against incredible odds. They bring society’s conscience to life with action. If nonprofits were basketball players, the majority would be Muggsy Bogues, not Yao Ming. And that’s the power of mission. Steal, baby, steal!

Chapter = c05

Date: Dec 13, 2010

Time: 11:57 am

Chapter = c03

Date: Dec 8, 2010

Time: 10:26 am

PART

III

Strategy If you don’t know where you’re going, you might wind up someplace else. —Yogi Berra

STRATEGIC PLAN Where to go tomorrow? Lines of Business Success Measures Vision

OPERATING PLAN What gets done today? Goals Budget

PURPOSE Why? Delegation Who does what? Duties Guidelines

Accountability When did it happen? Agendas Assessments

GOVERNANCE PLAN

S

trategy is where the high-impact decisions are made about how to bring the purpose to life. This begins with identifying the lines of business, which include your programs, services, and products. This is followed by constructing success measures for the organization and its lines of business. Strategy concludes with the creation of a vision that depicts the aspirations for major new undertakings like launching a new line of business, professionalizing fund raising, initiating a company-wide intranet, or undertaking a major capital campaign for a new facility. As shown in the illustration above, strategy makes its home in the strategic plan, where it is meant to advance the organization’s purpose. This is why the gurus of strategy like Michael Porter often talk about 63

Chapter = c03

Date: Dec 8, 2010

Time: 10:26 am

64

Strategy

competitive strategy.1 After all, why would any organization undertake a strategy if it didn’t advance its interests whether to serve its clients better, garner greater resources to serve those clients better, or to serve even more clients? Competitive strategy in the for-profit sector is defined as “an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.”2 Strategies are not the competitive advantage; they’re what establish it. The nonprofit sector takes a softer viewpoint of competitive strategy, which David La Piana and Michaela Hayes define as “pattern of thoughtful action through which an organization’s leaders seek an increased share of limited resources, with the goal of advancing their mission.”3 A simpler definition is that strategy brings purpose to life. Because the purpose defines your customer, the life-changing difference they experience, and how the agency is different from its rivals, purpose is inherently competitive. To be sure, talking about competitive strategy is putting the cart before the horse. That’s because many nonprofit executive directors have an incomplete picture of what’s on their organization’s strategy menu in the first place. Executive directors and board members frequently don’t understand the organization’s lines of business let alone how to go about measuring success. Once done, they are usually quite surprised—sometimes pleasantly, sometimes not—to see how broad the agency is in scope and depth. It is common sense that you should know where you are before charting a new course, but that is not the typical way that strategy making is done. Remember that the key uses of planning are to create strategies, program and implement them, and then achieve the results. Arranging these uses in the conventional order begins with identifying strategies at one end and achieving enhanced legitimacy at the other as shown in Table III.1. Unfortunately, it is not a foregone conclusion that the identification of strategies belongs at the beginning of protocol or in the process at all. In the words of Henry Mintzberg, “Strategy making is an immensely complex process, which involves the most sophisticated, subtle, and at times, subconscious elements of human thinking.”4 TABLE III.1 The Conventional Order Create Identify strategies

−→

Program Set direction

−→

Implement Communicate the plan Coordinate action

−→

Achieve Results Operational effectiveness Enhanced legitimacy

Chapter = c03

Date: Dec 8, 2010

Time: 10:26 am

65

Strategy

TABLE III.2 A Better Order Program Set direction

−→

Implement Coordinate action Communicate the plan

−→

Achieve Results Operational effectiveness Enhance legitimacy

−→

Create Identify strategies

A more fruitful way to look at the chronology is to start with programming the strategies that you already have. This method is easier to do and faster, and is a more efficient way to take advantage of the benefits of planning especially for the very large number of smaller nonprofits (see Table III.2). When you look at it this way, you begin to see why so many processes are long and laborious. It’s because these long-winded processes include both creating and programming strategy. It is strategy identification where the largest amount of time is consumed, but it’s not necessary or productive to do this. Strategy formation for most nonprofits is a once-in-a-long-while proposition. Launching a new line of business is hardly an annual affair, as it often takes a year to find, vet, and get ready to launch; another year to get it up and running; and then two to three years to get it online completely. Supporting this view are the results of a survey conducted by Community Wealth Ventures that found the average time from launch to profitability was two and a half years.5 Strategy guru Michael Porter argues that there are just three questions to be answered when building competitive strategy: “What is the business doing now? What is happening in the environment? What should the business be doing?”6 In other words, let’s not worry about where we’re going tomorrow until we understand where we are today. After all, who would plan a trip without knowing the point of departure? That’s why the Results Now strategic plan begins with the lines of business in Chapter 6, followed by success measures in Chapter 7, and concludes with the vision in Chapters 8 and 9.

Chapter = c03

Date: Dec 8, 2010

Time: 10:26 am

Chapter = c06

Date: Dec 13, 2010

Time: 10:24 am

CHAPTER

6

Lines of Business The human tendency to regard little things as important has produced very many great things. —G. C. Lichtenberg

hough it is true that the purpose is the heart of the agency, it only begins to walk its talk in the shoe-leather of strategy. More specifically and to broaden the definition, strategy brings purpose to life through the lines of business. And those lines of business make their home in the strategic plan. You can do a number of different things to maintain a competitive position with your lines of business. Michael Porter, for example, argues that there are just three approaches.1 First, you can be the low-cost leader that allows you to have above average profits or to charge less than your rivals. For instance, you might make the delivery process for services more efficient than your rivals, which allows you to charge much less than they do. Second, you can differentiate your product and somehow make it unique compared to your rivals. Making the customer the star was a way to do this for the Victoria Theatre. Third, you can choose which customers to focus on. You might be the only agency to serve clients with Down syndrome in a certain community or at a certain age. Any of these approaches might be magical, but without lines of business that exchange something of value between you and your customers, you have nothing with which to make the magic visible. Your lines of business generate the products or services of value for your customer. And in this brief chapter that belies its importance, you’ll learn why lines of business are important, why they are ends not means, and how to construct them.

T

67

Chapter = c06

Date: Dec 13, 2010

Time: 10:24 am

68

Strategy

Front Lines Many people at first have difficulty thinking about lines of business. It seems an acceptable idea for a manufacturer, but it’s a foreign concept when it comes to a housing agency or mentoring organization. It doesn’t take long, however, for people to get the hang of things when you ask the question in the context of core programs, services, and activities. In fact, the typical nonprofit has five or more lines of business compared to small for-profits that usually have just one.2 Lines of business are different from other activities within the organization because they are ends, not means. They must stand the customerdifference test. First, there is a customer external to the organization. Second, there is a life-changing difference for that customer. Because people naturally think first about products or services that are provided to the customers, they can lose sight of the life-changing difference they are trying to achieve. Consequently, lines of business often stray far afield from the purpose. This drifting, which is sometimes referred to as mission creep, is tacitly endorsed by funders who typically put new programs ahead of established ones, project funding over general operating support. And because funding for new programs is commonly done as a three-year commitment, getting out of the programs early is very hard to do. The customer-difference test helps you stay true to the purpose. Some people involved with the organization may profess little interest in seeing a list of lines of business. “We already know what we do,” they say. But board members and staff alike are many times surprised to see that what they thought was a relatively simple operation turns out to be much more dynamic. The benefit for the seasoned board member is to see the wide array of lines of business; the benefit for the new board member is to see them for the first time. In the process, some organizations decide that the array of lines of business is simply too broad to sustain; other organizations choose to expand. The example from a local United Way shows 14 lines of business: Research Resource development Nurturing children Strengthening families Building communities Eliminating abuse Heartland Encouraging self-sufficiency

Chapter = c06

Date: Dec 13, 2010

Time: 10:24 am

69

Lines of Business

Baby steps Immunization track Preschool jump-start Links Labor services Outcomers

Fourteen lines of business is common for an active organization such as a United Way that is involved in providing direct services, but this list is too broad to be memorable to most people, especially those pressed for time. After all, experts say that the maximum number of “chunks” of information we can easily retain in our short-term memory appears to lie between five and seven (plus or minus two).3 By grouping the lines of business by theme, the United Way was able to place its lines of business into four categories that not only made its work more understandable to stakeholders, but it also helped focus the organization (see Table 6.1).

TABLE 6.1 A Local United Way’s Lines of Business Research Problems identified and prioritized for others in need

Resource Development Amplifying the impact of giving for donors who want to help others in need

Resource Distribution Funding for high-impact problemsolvers directly help others in need

Nurturing children Strengthening families Building communities Eliminating abuse and neglect Encouraging self-sufficiency

Initiatives Leading solutions for others in need Management Heartland Services Fostering Incubating high-impact problem high-impact solvers in nonurban problem solvers areas Baby steps Outcomers Immunization Teaching track Preschool high-impact problem Jump-start solvers how to be use Links outcomes The web link to high-impact measurement solutions for Labor and others in need Community Services High-impact solutions in the workplace

Chapter = c06

Date: Dec 13, 2010

Time: 10:24 am

70

Strategy

Means and Ends Some staff and board members may wonder why administrative activities aren’t shown as lines of business given their significance to the organization. No one would deny, for example, that marketing is central to success in most nonprofits, but it usually is executed in direct support of the lines of business; it is a means to an end and simply does not pass the customer-difference test. Under no circumstances is this meant to diminish its importance or that of other administrative activities such as maintaining buildings or keeping accurate financial records. However, many people treat fund raising as a line of business because of its importance to the organization. After all, most lines of business reach breakeven only with the help of contributed income delivered through direct support or from the annual fund.4 Especially with regard to general operating support, fund raising is tied to all of the activities of an organization as opposed to one specific lines of business. As such, it is quite possible to identify a credible customer-difference statement. An example of how it might look is shown in Table 6.2. Another example of an activity that is a means to end but that could be considered a line of business is selling Girl Scout cookies. Representing as much as 60 percent of the revenue of some chapters, this is a major source of funds. Some chapters will see it as a line of business; others won’t. One council that saw cookie sales as a line of business felt strongly that this activity built confidence for the girls; another council thought that the buyers of the cookies were the customers. and the difference was in helping build confidence for the girls as well as enjoying delicious cookies. In other words, Girl Scout cookies feed the soul and the sweet tooth. TABLE 6.2 Fund Raising as a Line of Business Development The joy of giving to help others for everyone with a generous heart Individuals Corporations Foundations Special Events Planned Giving

Chapter = c06

Date: Dec 13, 2010

Time: 10:24 am

71

Lines of Business

Making Lines of Business Drafting the list of current lines of business is straightforward and takes very little time. You first generate a list of all the products, services, and programs that are delivered to the customers or clients of the organization. You then develop a customer-difference statement for each. It’s that simple. The level of detail within lines of business—including how many lines you have—should stop when it becomes difficult to develop reasonable customer-difference statements. Tables 6.3 and 6.4 show the lines of business for two different organizations. As shown in Tables 6.3 and 6.4, the preferred way to describe the lines of business is with brief customer-difference statements of no more than six to eight words. It is usually the executive director’s task to outline the lines of business. There is no one best way to go about doing this; some executive

TABLE 6.3 Big Brothers–Big Sisters Chapter Core Match

High School Mentoring

Teen Mothers

Building 7- to 13-year-old Building 15- to 17-year-old Building pregnant and parenting teens into Bigs into confident— Littles into confident— confident—competent— competent—caring competent—caring caring parents young adults young adults

TABLE 6.4 Multiple Sclerosis Chapter Lines of Business Newly Diagnosed

Research

Support Groups

You’re not alone for Ending the devastating those newly diagnosed effects for those living MS peer with MS connection Moving forward Knowledge is power

Living the fullest life possible for those living with MS

Update Education

Direct Disbursements

Staying current for those living with MS Fall Education Conference National Television Conference

Solutions for those without means Equipment Direct counseling Referral counseling

Chapter = c06

72

Date: Dec 13, 2010

Time: 10:24 am

Strategy

directors will quickly list all the products, services, and programs that the organization is delivering and group them in a logical fashion. Others will involve key professional staff in a group setting and use brainstorming to develop the list of current lines of business. Once done, you are ready to work on the success measures.

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

CHAPTER

7

Success Measures What you measure is what you get. —Robert Kaplan and David Kaplan1

A

s is the case with lines of business, success measures are used to answer Michael Porter’s question of “What is the business doing now?”2 Unlike the lines of business customer-difference statements that describe what you’re doing now from a qualitative perspective, success measures look at this question from a quantitative point of view. Along with the lines of business and their customer-difference statements, success measures provide a powerful way to ensure that the purpose comes to life. In this chapter, you’ll discover that you can indeed measure the unmeasurable, why it’s important to do so, and how to do it.

Measuring the Unmeasurable If shareholders want to know how a for-profit company is doing, they typically take the measure at the bottom line. Whatever this bottom line is called, be it shareholder wealth, net profit, share price, or return on investment, forprofits depend on financial information as a fundamental measure of their success. To listen to some of the experts, nonprofits would seem almost antifinancial when it comes to measuring lines of business. As William Bowen, president emeritus of the Andrew W. Mellon Foundation, puts it, “There is no single measure of success, or even of progress, that is analogous to the proverbial bottom-line for a business.”3 Jim Collins of Good to Great fame takes a similar viewpoint, “For a business, financial returns are a perfectly legitimate measure of performance. For a social sector organization, performance must be measured relative 73

Chapter = c07

Date: Dec 8, 2010

74

Time: 8:44 am

Strategy

to mission, not financial returns.”4 The idea that nonprofits are unable or incapable of paying attention to the bottom line is widely held. Michael Porter and Mark Kramer assert that nonprofits “operate without the discipline of the bottom line in the delivery of services.”5 Regina Herzlinger says that nonprofits lack the “self-interest that comes from ownership . . . they often lack the competition that would force efficiency [along with] the ultimate barometer of business success, the profit measure.”6 No discipline? Lacking in self-interest? These viewpoints fall far short of the reality. Exemplary nonprofits regularly measure results to determine effectiveness. Twenty years ago, Rosabeth Kanter and David Summers recognized that “nonprofits are increasingly setting more stringent financial goals, reporting ‘operating income’ as though it were ‘profit.’”7 At about the same time, Peter Drucker asserted that “nonprofit enterprises are more moneyconscious than business enterprises are. They talk and worry about money much of the time because it so hard to raise and because they always have so much less of it than they need.”8 In other words, that nonprofits don’t, shouldn’t, or can’t use financial returns to measure performance is as much a myth as the idea that nonprofits can’t make a profit at all.9 To be fair, it’s not that nonprofits don’t have measures; it’s just that many aren’t financial or even written down. Furthermore, nonprofits often have measures based on the quality of things, which is very challenging because it’s softer in texture, “How much” is much easier to measure than “how good” or “what good.” Peter Goldmark, former president of the Rockefeller Foundation, describes it this way, “You don’t have a central financial metric that is really central. . . . You are dealing with more squishy intangible issues of social change or public attitudes and behavior.”10 In other words, it is one thing to measure how many people quit smoking at the weekly cessation class, but quite another to do it with “such subtle outputs as tender loving care in a nursing home, appreciation of art and music, and education in cultural values.”11 That said, this viewpoint is increasingly seen as a cop-out; it is possible to measure such things and the best nonprofits do it regularly. Take appreciation of classical ballet for example. A ballet company can easily count standing ovations after a performance, the number of tickets sold, and the number of intermission walk-outs; all are perfectly legitimate surrogates for customer enjoyment.

Why Measure? The more you know about how success is measured, the better. First, having an explicit understanding about success measures provides a common vocabulary for monitoring performance. Thus, people with widely differing

Chapter = c07

Date: Dec 8, 2010

Success Measures

Time: 8:44 am

75

viewpoints can be on the same page when it comes to evaluating the work of the organization. Gone is the muddle of trying to decide what to evaluate every time the issue of performance comes up. Second, the executive director and the board can understand exactly what it means to achieve meaningful results. In addition to giving all participants a level playing field when it comes to performance, success measures offer the board and staff an agreed-upon platform for celebrating success, correcting deviations, or even for incentive compensation provided that it is based on measurable results that the employee has control over.12 Even better, this platform of success measures is readily available and usually preapproved by the board. Third, success measures provide meaningful information that can make fund raising harder hitting in the case statement and provide required data for compliance reporting. Are you looking for a list of things to highlight in the newsletter, annual appeal, or annual report? It comes ready-made in the success measures. Fourth, success measures provide a valuable source of questions for the board member to use in fulfilling a key responsibility. Sharon Percy Rockefeller, president and CEO of Washington Area Television Authority, says that a board member’s role is straightforward: “Ask why. Why do we have that priority? Why are we doing that now? Why aren’t we doing that now”?13 Much of the information needed to form these questions comes from the success measures, which also helps the executive director, who has the obligation to answer those tough questions, be prepared, and be knowledgeable. Fifth, having an agreed-upon set of success measures in the strategic plan that the board and executive director are vigilant about monitoring creates a much greater likelihood of actually achieving the desired results. Later in the operating plan, where the decisions are made about what gets done today, the success measures provide valuable guidance on where to focus attention. Sixth, by connecting the thinking about tomorrow with the work that gets done today, the likelihood of action is higher and the chances of “bookshelfing” are lower. Instead of constructing a plan and throwing it over the wall to departments where it will gather dust on the bookshelf, the success measures force a feedback loop that is useful to everyone and that keeps the strategic plan alive. Seventh, having well-articulated success measures saves time and makes people smarter. What with busy board and staff members, why keep explaining what happened how many years ago at the bottom line or with a particular program when your success measures can put that information right at the fingertips of those who need it? Want decision makers to be smarter? Then give them the information that can make it so! Imagine a new board or staff member is looking at this information for the first time.

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

76

Strategy

Though there may still be complaints about the loss of organizational memory, at least aspects of it are maintained, and questions that arise about the past can be easily answered. Eighth, it bears repeating Robert Herman and David Renz’s assertion that comparison is at the core of effectiveness, “The comparison may be to the same organization at earlier times, or to similar organizations at the same time, or to some ideal model, but effectiveness assessments are always a matter of some kind of comparison.”14 With well-crafted success measures, you can compare your agency to itself at an earlier time and to other, like agencies. Finally, the benefit of deciding success measures often first comes from the discussions and inevitable soul searching that arise in deciding which ones to use. Vitally important questions of priorities become apparent; issues about precious resources of money and time are verbalized. For many boards, the determination of success measures often presents the first opportunity ever to think about what is truly important and what is merely trivial. Says William Bowen, “Efforts to develop key indicators can be the occasion for a nonprofit board to think seriously (perhaps for the first time) about what really matters to the organization.”15 Table 7.1 shows selected lines of business success measures for a Girl Scout Council. The success measures criteria are in the left-hand column and the history and targets for each measure are in the successive columns to the right. TABLE 7.1 Girl Scout Council Selected Lines of Business Success Measures

Girl Scout Troops Total Retention New Diversity Daisies Total Retention New Diversity Brownies Total Retention New Diversity

Year before Last

Last Year

This Year

Next Year

Year after Next

15,999 10,254 5,745 3,317

17,499 11,322 6,177 4,800

18,244 11,817 6,427 4,976

18,429 11,902 6,527 4,976

19,000 12,000 7,000 5,000

824 31 793 26

550 37 513 34

980 0 980 75

1,006 6 1,000 101

1,100 35 1,050 120

5,218 3,624 1,594 445

5,268 3,550 1,718 465

5,450 3,720 1,730 482

5,476 3,726 1,750 533

5,450 3,500 1,800 500

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

77

Success Measures

Notice that the last two columns on the right do not describe what business you’re in, Michael Porter’s first question of strategy building. Instead, the focus is on the future, which is his third question, “What should the business be doing?”16 In setting targets, the question arises about probabilities. What should the probability of achievement be for next year, the year after that, and so on? Expectancy theory suggests that the “degree of motivation and effort rises until the expectancy of success reaches 50%, then begins to fall even though the expectancy of success continues to increase.”17 Why not apply this approach to the targets? This may be legitimate for targets set two years out, but it is not advisable especially for the targets for next year. Because many organizations use next year’s targets to provide important information for budgeting, the targets are usually best set with a higher probability of 80 percent or better. That doesn’t mean stretch is not welcome; it does mean that stretch has to be legitimate in the next fiscal year’s targets. Table 7.2 is another example of selected lines of business success measures from a performing arts organization. The amount of history shown in success measures is flexible. Five years is better than four years, and three is better than two. Anything less than two years makes it difficult to see trends. The number of years out in the future is a different matter altogether, with three being the maximum recommended length and one year being more common. Some of this is due no doubt to uncertainty about what will happen in the future. The problem with showing measures for just one year in the future is that the readers do not get a sense of direction, but the staff will argue that setting targets more than one year out is academic. Given that it can often take three years for a new line of business to show its full impact, there are times when a longer horizon is a good idea especially when it comes TABLE 7.2 Performing Arts Agency Selected Lines of Business Success Measures (in thousands) Festival Attendance # Paid Attendance # Street Attendance # Income $ Opera Attendance # Subscriptions # Paid Single Tickets # Comp Single Tickets # Income $ Renewal Rate %

Year 3 Year 2 Year 1 Last Year This Year Next Year 6.7 6.7 0 53

11 6 5 56

33.6 8.6 25 68

19.9 7.4 12.5 35

23 8 15 39

20 5 15 42

13.7 2.6 4 2 366 81

15.5 2.7 3.4 3.9 453 80

14.7 2.7 5.2 1.5 564 73

12.3 2.6 3.1 1.6 468 70

21.4 2.9 9.4 1 1,070 75

19.5 3.3 5.6 1.5 957 75

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

78

Strategy

to financial measures. The board and staff usually find compromise in giveand-take dialogue that replaces the old show-and-tell reporting. Having said this, if you desire a three-year horizon, no rule exists to prevent it.

Making Success Measures Effective success measures can contain a wide variety of components, including outcome indicators, financial measures, and measures of activity. Measures do not tell the reader whether the organization is doing a good job or is in need of corrective action. Measures are measures, nothing more, nothing less. Most success measures have a clear activity texture about them. Tickets sold, classes attended, grades achieved, number of customers, number of customers who return, number of customers that do not recidivate. This is not to diminish the value of measuring outcomes as advocated in recent years, especially by United Ways. But let’s be realistic here: outcome measurement is no walk in the park. United Way of America early on recognized the “tension between the need for technically sound methodologies, which can be expensive and time consuming, and the staffing, funding, and workload realities that constrain nearly all service agencies.”18 Maybe this helps to explain why program output measures are the number one measurement tool used by 81 percent of nonprofits compared to program outcomes that are in third place at 58 percent.19 When choosing criteria for the success measures, an important condition is that the measures be easy to use. A measure built around information that is readily available is often preferable to building one from scratch. Furthermore, the cost of using the measure needs to be considered as there is very little point in having brilliantly designed success measures that require a quarter-time staff member for tracking. A reasonably good success measure easily used without cost is usually superior to a great success measure that is expensive. In the process of building success measures, there is a natural tendency to generate more ways to measure a line of business than can possibly be managed. The number and permutation of success measures is surprisingly broad, and you can forget that measuring success takes time and effort, resources that are limited in most nonprofits. When doing the first Results Now master plan for an organization, you are best to stick with the “less is more” approach and see how successful it is.

Mission Success Measures Success measures should always include mission success measures. Like the well-known blood pressure, pulse, and temperature at every visit to the

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

79

Success Measures

TABLE 7.3 Performing Arts Agency Mission Success Measures (in thousands)

Year 3

Year 2

Year 1

Last Year

This Year

Next Year

Attendance # Total Revenue $ Earned $ Contributed $ Net Income $

24 1,220 450 770 (189)

18 1,240 521 718 (47)

41 1,460 797 664 65

31 1,640 970 671 (42)

42 1,950 1,230 726 (45)

42 1,900 1,190 713 (86)

doctor, these mission success measures are usually composed of no more than three or four success measures with a global texture. It is quite common to see success measures related to financial condition and total number of clients served. These success measures offer an effective way to quickly ascertain the performance and health of the organization. Table 7.3 shows the mission success measures from a performing arts organization. These success measures tell a story. Attendance had a big jump a few years ago along with income. The earned-to-contributed ratio seems to be improving, but shows dramatic change from year to year, and net income has been consistently negative. Looking forward, the organization seems to anticipate continuing difficulties. Like all success measures, the story told is always open to interpretation; the success measures are intrinsically neutral. Perhaps the organization is engaged in an effort to build its clients that brings with it planned deficit spending. Perhaps the organization is slowly sinking, or maybe the organization’s growth is making it hard to concentrate on its core lines of business. Mission success measures commonly have a bias for financial information and can be quite thorough complete with graphs as shown in Table 7.4 from an economic development agency culled from six years of IRS Form 990s. As you review these success measures, questions will arise. Balance sheet assets peaked in year 4, and expenses have risen in recent years along with a persistent deficit. This combination often happens when new facilities are brought on line. As Clara Miller warns, “Even in the best of circumstances, acquiring a facility that doesn’t push an organization’s fixed costs to an uncomfortable level is devilishly difficult.”20 Notice that the current ratio, which “matches the short-term assets of an organization with liabilities that it expects to face,”21 has also fallen dramatically. Granted, the gold standard for the current ratio is two or better, but something is happening here that likely demands the attention of the board and executive director. Is it reasonable to use data from IRS Form 990s in success measures? From a usability standpoint, they provide a good deal of information and are “a reliable source of information for basic income statement and balance

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

80

Strategy

TABLE 7.4 Economic Development Agency Organizational Financial Success Measures ($ in thousands)

Year 6

Year 5

Year 4

Year 3

Year 2

Year 1

2,330 177

3,552 74

3,305 121

2,431 140

3,477 295

3,412 131

Total Revenue $

2,507

3,626

3,426

2,571

3,772

3,542

Total Expenses $

2,072

1,998

2,868

2,962

4,065

3,877

Excess/(Deficit) $ Balance Sheet Assets $ Liabilities $ Net Assets $ Capital Structure Total MarginA Current ratioB

435

1,628

558

(390)

(293)

(335)

986 554 432

3,583 1,519 2,064

3,968 1,344 2,624

3,589 1,349 2,239

2,949 999 1,950

2,463 864 1,599

0.17 5.6

0.45 10.6

0.16 11.4

(0.15) 10.9

(0.08) 3.9

(0.09) 2.1

Profit & Loss Contributed Revenue $ Earned Revenue $

A

Total Margin: (Total Revenue minus Total Expenses) divided by Total Revenue Ratio: Current Assets divided by Current Liabilities

B Current

sheet entries.”22 Moreover, the 990s offer you a reasonable way to compare your agency to others, which is very useful. Some may argue that there is too much financial information provided, but like all success measures, you want enough information to tell the story. Indeed, I almost always add two more measures to the capital structure section: operating reserves and working capital, which are discussed in Appendix B. For the economic development organization above, including seven years was necessary because something quite worrisome is happening that shows clearly in the three most recent years. Had these success measures been in place, perhaps the board and executive director would have seen the challenge much earlier when the deficit was more manageable.

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

81

Success Measures

TABLE 7.5 Regional Theatre Lines of Business Success Measures This Year (in thousands) Activity Attendance # Subscriptions # Single Tickets # Income $ Net Income $ Satisfaction Renewal % Standing Ovations % Intermission Walkouts % Buy-to-Attend Ratio %

Year 3

Year 2

25.3 2.4 13.4 691 (143)

16.7 2.4 3.2 414 (155)

70 48 7 87

73 26 16 78

Year 1

Plan

14.5 11.3 1.9 2.7 5.5 3.4 352 257 (177) (74) 56 56 8 86

74 63 6 88

Forecast

Next Year

10.8 2.6 3.0 268 (75)

10.5 2.6 2.1 263 (75)

80 65 6 90

74 56 9 85

Lines of Business Success Measures While the mission success measures offer a snapshot of the organization, they do not offer the full picture that comes from adding in the lines of business success measures. Table 7.5 illustrates selected success measures from a regional theatre. These particular success measures are ready for presentation to the board of directors at a meeting that will focus on developing a new strategic plan for the coming fiscal year. In this example, there are two primary categories for a theatre series. The first are the activities success measures that are mostly about counting; the second are the satisfaction success measures. The success measures are neutral and offer the chance for interpretation and discussion. For example, what has caused the 46 percent drop in total attendance for the resident series from 25,300 in Year 3 to 11,300? How does this drop correlate to the improvement in series losses and improvement in renewal rate? Notice in the second grouping of success measures that the criteria are about customer satisfaction. Renewal rate is the percentage of subscribers who renew from one season to the next. The steep drop from year 2 to year 1 could be related to the way customers felt about the shows in year 2 because standing ovations were down, intermission walkouts were much higher, and the buy-to-attend rate—a measure of word of mouth—was down. These are all indicators of satisfaction. The repertory was adjusted in year 1 to a more pleasing mix, which shows in the results. Though quantitative survey research might get at customer satisfaction in a way that is more generalizable and a qualitative interview study could yield more nuanced information, these are expensive and time consuming approaches. In the success measures, the organization is taking advantage

Chapter = c07

Date: Dec 8, 2010

Time: 8:44 am

82

Strategy

TABLE 7.6 Arts Agency Fund-raising Line of Business Success Measures This Year (in thousands of $)

Year 4

Year 3

Year 2

Year 1

Plan

Forecast

Next Year

Total Raised Annual Giving Annual Fund Government Leadership Giving Legacies Sponsorship

1,560

1,680

1,740

1,670

1,710

1,730

1,930

280 258

332 279

360 391

390 385

370 363

440 290

425 345

18 1,020

20 1,070

22 986

22 892

26 981

30 1,000

26 1,160

of readily available information; ushers can easily count standing ovations and intermission walkouts. The computerized ticket system can easily do the other two. In many respects, these success measures are actually measuring the outcome of a satisfied attender. As you can see in this example, the current year is broken into two columns: one for the budgeted amount that was passed in advance of the fiscal year and one for the forecast for year end. This can be very helpful in terms of assessing progress, which itself is a fundamental tool for ensuring accountability. For those interested in having a fund-raising line of business, Table 7.6 lists the success measures used at an arts agency. Remember that there is an inclination to have too many success measures. Don’t forget the Results Now rule of thumb from Albert Einstein, “Everything should be made as simple as possible, but not simpler.”23 By developing lines of business and success measures, you can answer Michael Porter’s first question of “What is the business doing now?,” and if you set targets for the future, you can also answer the question of “What should the business be doing?”24 For many organizations, this may be as far as you need to go. Targets from the success measures can be taken into the operating plan to form goals, and you can deal with the vision next time around if that makes sense. Alternatively, you might work on the vision to be sure you’ve answered the question about what the business should be doing. Maybe some lines of business should be phased out; maybe you should launch new ones or work on operational effectiveness instead.

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

CHAPTER

8

Vision Statement Chance favors the prepared mind. —Louis Pasteur

J

erry Maguire’s vision statement was a very simple one that epitomizes the inspirational quality of many: “We must simply be the best versions of ourselves.”1 His eventual success shows what many writers in the popular literature have long argued, that vision is absolutely essential to effective leadership.2 Scholars give an equally strong vote of confidence to its importance.3 As such, it is now generally accepted that the “single defining quality of leaders is the capacity to create and realize a vision.”4 In other words, “leadership behavior that is not infused with vision is not truly leadership.”5 Does vision deserve all this glowing press? Is vision truly “a force in people’s hearts, a force of impressive power”?6 Is it really the “essential leadership act”?7 This chapter will answer this question by showing how visions vary depending on the context and how to go about making a vision statement, including preparing your mind and then setting the statement itself.

Vision Types The news that vision is a hallmark of effective leadership would be cause for celebration if there were agreement on what it actually is. Gary Yukl says that vision is “a term used with many different meanings, and there is widespread confusion about it.”8 One study of vision content showed that visions are not necessarily homogeneous and range from the imprecise to

83

Chapter = c08

84

Date: Dec 8, 2010

Time: 8:50 am

Strategy

the specific;9 another study of innovative leaders found that all of them had a vision, but the visions varied widely from vague to concrete.10 For example, some like John Kotter define vision quite broadly as “a picture of the future.”11 Henry Mintzberg takes the view that it’s strategy writ large: Vision sets the broad outlines of a strategy, while leaving the specific details to be worked out. In other words, the broad perspective may be deliberate but the specific positions can emerge. So when the unexpected happens, assuming the vision is sufficiently robust, the organization can adapt.12 Making sense of the differences are Jill Strange and Michael Mumford who reviewed a host of definitions and found the commonality that “vision may be conceived of a set of beliefs about how people should act, and interact, to attain some idealized future.”13 As Burt Nanus so eloquently puts it, “vision always deals with the future. Indeed, vision is where tomorrow begins.”14 Thus, purpose is in the present tense; vision is in the future tense. One thing is for sure when it comes to vision—it matters. From an academic perspective, Raed Awamleh and William Gardner showed that an “idealized vision can help leaders to enhance their image.”15 A longitudinal study of entrepreneurial firms found that “vision significantly affects organizational-level performance, and vision affects performance directly as well as indirectly through vision communication.”16 John Kotter places underestimation of the power of vision in his top three reasons for why transformation efforts fail.17 For Henry Mintzberg, “vision—expressed even in imagery, or metaphorically—may prove a greater incentive to action than a plan that is formally detailed, simply because it may be more attractive and less constraining.”18 Leaders of organizations are paying attention. In 1989, 1,500 leaders from 20 different counties, including 860 CEOs, agreed that vision was crucial to success.19 Popular writers picked up and amplified the importance of vision, and by the mid-1990s, all top executives had visions of one sort or another.20 The position that vision is essential has not abated in the new millennium.21 In 2003, vision was a top-three management tool used by 84 percent of the respondents from a survey of 708 companies on five continents and this position had not faded at the end of first decade.22 Lest we get too carried away, not everyone is convinced of the power of vision. The venerable Bass & Stogdill’s Handbook of Leadership barely makes note of vision in its 1,182 pages.23 A study of 1,400 Australian public sector employees indicated that “articulating a vision does not always have

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

85

a positive influence on followers.”24 Another study in the Israeli Defense Forces showed that a leader’s vision was “not positively related to subordinate identification and trust, self-efficacy, and motivation and willingness to sacrifice.”25 For some highly regarded practitioners, vision is specific enough to have a direct impact on the day-to-day efforts in the workplace: A vision gives you a focal point. . . . It tells people what’s expected of them. Frederick Smith, Chairman, President and CEO, FedEx Corporation A vision provides a framework through which you view everything that goes on in the company and in the external environment. Raymond Gilmartin, President and CEO, Merck & Co.26 The vision referred to by these deans of corporate America is “valuable because an organization needs to know where it wants to be in order to act in a reasonably efficient manner to get there.”27 It is defined by its drive to yield specific results.28 This includes Ronald Heifetz’s adaptive work where “a vision must rack the contours of reality; it is has to have accuracy, and not simply imagination and appeal.”29 These kinds of vision have an operational texture somewhat similar to formal planning, which “seems better suited to the tranquilities of peacetime than the disruptiveness of war, especially unforeseen war.”30 The visions that yield practical results are the type that Paul Valery referred to when he says, “The best way to make your dreams come true is to wake up.”31 In this respect, vision as a term is synonymous with strategies that help you achieve major results. Another kind of vision is the type that elevates and takes the organization to someplace new.32 It is “a new story, one not known to most individuals before.”33 Defined by idealism, these visions are “transcendent in the sense that they are ideological rather than pragmatic, and are laden with moral overtones.”34 These are the kind of visions that Walt Disney refers to in his often-repeated quote, “If you can dream it, you can do it.”35 In this respect, vision as a term is synonymous with what an overarching picture of what success will look like in the future. That there are differences in the definitions of vision is hardly news.36 Though vision has been the subject of much discussion, “there has been little definition of content. No one has described how to develop vision that has broad-based commitment. Equally important, there has been little written on how to communicate vision, how to renew it, and how to sustain it over long periods of time.”37 In all of this confusion, however, patterns begin to

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

86

Strategy

emerge. What follows is a list of desirable vision characteristics culled by Gary Yukl from a who’s who of experts: simple and idealistic; a picture of a desirable future; not a complex plan with quantitative objectives and detailed action steps; appeals to values, hopes, and ideals; emphasizes distant ideological objectives; challenging, but realistic; not wishful fantasy; an attainable future grounded in the present reality; addresses basic assumptions about what is important for the organization; focused enough to guide decisions and actions; general enough to allow initiative and creativity; simple enough to be communicated clearly in five minutes or less38 There are contradictions within this list that cannot be easily resolved. For example, how can a vision emphasize distant ideological objectives while also being focused enough to guide decisions? Grouping these desirable characteristics around common themes resolves many of the inconsistencies and it becomes clear that there are not one, but two major types of vision as shown in Table 8.1 The idea that there might be two primary types of vision is hardly groundbreaking news among practitioners. Alan Guskin, former chancellor of Antioch University, takes this point of view: I believe that one must be both idealistic and pragmatic. For, to be idealistic without being pragmatic leads to frustrated aspirations and unfulfilled promise; to be pragmatic without being idealistic leads one to be a hack and a bureaucrat. Being both idealistic and pragmatic leads to hope and optimism along with being realistic and focused.39 Nor is this paradoxical blend unusual in the literature. For example, Glenn Rowe argues that strategic leaders show a “synergistic combination

TABLE 8.1 Vision Types Characteristics

Types

– Simple and idealistic; simple enough to be communicated clearly in five minutes or less; a picture of a desirable future; not a complex plan with quantitative objectives and detailed action steps; appeals to values, hopes, and ideals; emphasizes distant ideological objectives – Challenging, but realistic; not wishful fantasy; an attainable future grounded in the present reality, addresses basic assumptions about what is important for the organization; focused enough to guide decisions and actions; general enough to allow initiative and creativity

Idealistic

Pragmatic

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

87

of managerial [pragmatic] and visionary leadership [idealistic].”40 This is consistent with Jim Collins and Jerry Porras’s view that vision “consists of two parts: a 10-to-30 audacious goal plus vivid descriptions of what it will be like to achieve the goal.”41 My study of 16 exemplary nonprofit leaders in Dayton, Ohio, found that the concept of vision resonated strongly and that the most supported vision was to always accomplish the mission. This was followed by a tie for second place between be more financially sound and be the best at what you do.42 In other words, always accomplishing the mission was idealistic in texture; financial strength and being the best were pragmatic. Results Now splits the vision into two elements: the clear, broad-stroke picture of the future is the vision statement; the strategies that bring it to life are the vision strategies. The statement and the strategies can come in idealistic, pragmatic, or both.

Making Statements Many characterize vision making as an almost mystical process with spiritual undertones. Says Po Bronson, “Most of us don’t get epiphanies. We only get a whisper—a faint urge. That’s it. That’s the call.”43 Charlie Knight, a Ute medicine man, describes how he found his vision, “Everyone has a song. God gives us each a song. That’s how we know who we are. Our song tells us who we are.”44 Jay Conger observes that “vision when articulated is surprisingly simple; yet when we examine the evolution of a specific leader’s vision it appears to be a much more complex process. Events stretching as far back as childhood may influence its origins.”45 Most people don’t want to wait for whispers or songs from God or go through Freudian therapy to get at their childhood vision inputs. They want a rational process where the “vision starts with understanding the enterprise—or in other words, what you see depends on where you stand—you must be quite clear about the fundamentals of the business you are in.”46 This is how General Electric approaches vision making, which “only comes after hard thought about the capabilities of the organization and the needs of the market.”47 The classic model of this systematic process is summarized as follows: The firm’s first step in the process is to analyze its external environment and internal organization to determine its resources, capabilities, and core competencies—the sources of its “strategic inputs.” With this information, the firm develops its vision and mission and formulates one or more strategies.48

Chapter = c08

Date: Dec 8, 2010

88

Time: 8:50 am

Strategy

The brevity of this summary belies the effort required. For example, John Bryson’s approach for nonprofits is a 10-step process: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Initiate and agree upon a strategic planning process. Identify organizational mandates. Clarify organizational mission and values. Assess the organization’s external and internal environments to identify strengths, weaknesses, opportunities, and threats. Identify the strategic issues facing the organization. Formulate strategies to manage these issues. Review and adopt the strategic plan or plans. Establish an effective organizational vision. Develop an effective implementation process. Reassess strategies and the strategic planning process.49

What identifies this as the basic planning model is the reliance on the SWOT model (strengths, weaknesses, opportunities, and threats). The SWOT model makes the promise that by knowing your agency’s strengths, weakness, opportunities, and threats, you can finally have “a wonderful future” as Paul Tulenko puts it.50 Here’s how SWOT analysis works: 1. You assess your internal strengths and weaknesses. 2. You move to the external environment where you identify opportunities and the threats 3. You put this information into the mix and your strategies are born. Reliable SWOT analyses are unfortunately the rarity. As Henry Mintzberg puts it, “the detached assessment of strengths and weaknesses may be unreliable, all bound up with aspirations, biases, and hopes. . . . Who can tell without actually trying, if the strength will carry the organization through or the weakness will undermine its efforts?”51 What about competitor analysis, which is often done as part of looking for your threats? Surely knowing what your competitors are up to will help you be more successful. Gary Hamel and C. K. Prahalad tell us that this, too, is fraught with difficulty because “traditional competitor analysis is like a snapshot of a moving car. By itself, the photograph yields little information about the car’s speed or direction . . . assessing the current tactical advantages of known competitors will not help you understand the resolution, stamina, and inventiveness of potential competitors.”52 Indeed, nonprofit planning expert John Bryson notes that SWOT analysis “does not offer specific advice on how to develop strategies, except to note that

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

89

effective strategies will build on strengths, take advantage of opportunities, and overcome or minimize weaknesses and threats.”53 Ultimately, making vision requires that you “see and to feel . . . it requires a mental capacity for synthesis.”54 This is certainly true of Amar Bhide’s study that found “many successful entrepreneurs spend little time researching and analyzing.”55 Four percent found ideas through systematic research for opportunities like SWOT, 20 percent were discovered serendipitously, 71 percent came from an idea encountered at an earlier job, and the final 5 percent came from going with the flow of their industry.56 Starting out with SWOT means that that you’ll inevitably focus on your weaknesses, which is self-defeating, as nonprofit expert Thomas McLaughlin observes: Few strategic concepts have taken hold quite so thoroughly as the SWOT model of strategic planning. It offers an appealing balanced approach—identify your strengths and weaknesses, and be aware of your threats and opportunities. But in practice it doesn’t deliver. In fact, it tends to divert attention to unproductive areas . . . like a kindly, wellmeaning family doctor who inadvertently gets you thinking about disease when you should be thinking about health.57 This view not only shows up in planning literature, it also appears in advice on career building.58 Don’t take the “path of most resistance”59 says Tom Rath of Clifton StrengthsFinder fame, but instead understand that “the key to human development is building on who you already are.”60 You want to prepare your mind for visioning; you want stay positive where insights are more probable.61 Even though we assume that “the best way to solve a difficult problem is to focus, minimize distractions, and pay attention only to the relevant details, the clenched state of mind may inhibit the sort of creative connections that lead to sudden breakthroughs.”62 Think back to Muggsy Bogues. If he had used SWOT, he would never have played basketball, let alone been an NBA first-round draft pick. But the game was his mission; it was who he was. That’s what counted for Muggsy Bogues and kept him going. And because he wanted to be the best he could be, he had to shoot for the NBA. Thank goodness he grew up poor in the Baltimore projects where management consultants weren’t out in force with SWOT analyses. After all, “one cannot tell whether it is a strength or a weakness to be seven feet tall until one specifies what the tall individual is supposed to do.”63 And being seven feet tall would have definitely been a weakness for Muggsy given his bent for stealing the ball. Do what you love, love what you do is not the typical outcome of the SWOT model. That’s why you should just “swat the SWOT,” according to Tom McLaughlin.64

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

90

Strategy

Ready Your Mind Eric Beinhocker and Sarah Kaplan’s study of the strategic-planning process at 80 large for-profit companies found that one of the primary purposes of formal planning was “to build ‘prepared minds’—that is, to make sure that decision makers have a solid understanding of the business, its strategy, and the assumptions behind that strategy, thereby making it possible for executives to respond swiftly.”65 This is consistent with Michael Porter’s three-step approach to strategy making that begins with “What is the business doing now?”66 The notion that you should prepare your minds for vision making showed up convincingly in my study of 16 high-performing executive directors. I asked about the origins of their visions and then had the participants prioritize the answers to yield the first three steps for readying your mind and I add a fourth item drawn from the earned income literature:67 1. 2. 3. 4.

Reaffirm your purpose. Listen to your customers. Know the best of best in your field. Understand your risks.

Though the objective of readying your mind is to gain a deeper understanding of what your business is doing now, you will definitely generate many ideas for vision strategies in the process. It is therefore very important for you to keep careful track of these ideas as you go along because they will be very useful later.

REAFFIRM YOUR PURPOSE Reaffirming the purpose begins with the review of values that are part of the purpose. Do these values restrict you in any ways that are related to your vision? Do they provide insight on the boundaries for selecting strategies? Take the example from earlier of the five values: ■ ■

■ ■

■

We are collaborative: optimistic, cooperative, effective communicators. We are innovative: proactive, experimental, persistent continuous learners. We are customer centered: respectful, responsive, and solution driven. We are professional: results driven, dedicated, and knowledge-andexperience-based decision makers. We are trustworthy: fair, transparent, truthful promise keepers.

These values form criteria that might be used to stimulate thinking about possibilities and to help consider whether current activities are congruent

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

91

with these values. Certainly, these values suggest that riskier, out-of-the-box ideas will be welcome and encouraged; ideas not centered on customers may be eschewed. Being knowledge-and-experience-based decision makers suggests an analytical approach to prioritizing the ideas that arise. The mission can be equally stimulating. You know the customers you want to serve, you know the difference that you want to make in their lives, and you understand what you’re going to do to be better than your rivals. But as Peter Brinckerhoff cautions: You will find (as I always do) that, while your staff and board may well know the words of the mission, they are not unanimous in their interpretation of the outcomes. . . . If, for example, your board feel that your focus should be on improving quality of service (doing the best possible service) while the staff feels that it should be on expansion (doing the most possible), there will be a conflict.68 Take, for example, an agency that serves homeless women ready for change. Its primary lines of business are housing, real-life tools, and a support network. But can these women be married? Can their husbands join them? Can they have children in tow? How old can the children be, the women? Talking through the issues, taking the temperature of your board, staff, and other stakeholders, can be very helpful in terms of generating ideas and maybe revising even your mission. What issues should you discuss specifically? Peter Drucker’s straightforward five-question protocol for evaluating “what you are doing, why you are doing it, and what you must do to improve”69 begins with the question of mission. To get at the answer, he suggests four questions: “What is the current mission? What are our challenges? What are our opportunities? Does the mission need to be revisited?”70 Of these, the first—what is the current mission—is the most salient for preparing for vision making. And probing this requires a discussion around the following: “What meaning does the mission have for you? In what ways has the organization furthered the mission?”71 At the Victoria Theatre Association, the board was quite bullish on growth within the confines of our mission boundaries, but I know many other agencies that are very risk averse. The only way to know is to ask. For instance, a group in another Ohio city invited us to manage its Broadway series. It looked great on paper, but our mission statement was quite clear that we were the regional—not statewide—center. As such, the board needed to be involved in the discussion and together we all decided that taking on a new market was less valuable than developing new offerings for our community.

Chapter = c08

92

Date: Dec 8, 2010

Time: 8:50 am

Strategy

LISTEN TO YOUR CUSTOMERS Consistent with the use of success measures, four in five nonprofits use some sort of program output measures when it comes to performance measurement.72 Success measures are certainly a legitimate and obvious useful method for tracking performance of existing activities, but what about new strategies that don’t yet have a track record? When it comes to gauging the success of recent nonprofit innovations, client feedback takes the lead position.73 If going to the clients after the fact is the key way to evaluate success on a new strategy, why not begin with them? This is the key premise of listening to the customer. Looking at what’s going on with those you serve doesn’t mean looking at your customers from a helicopter; it means seeing them eye to eye. Eye-toeye understanding typically requires research whether qualitative up-frontand-personal interviewing or quantitative broad-and-deep surveying. Peter Drucker gets at the customer question by addressing the following three topics: “Who is our primary customer? Who are our supporting customers? How will our customers change?”74 He defines the two types of customers this way: The primary customer is the person whose life is changed through your work. Effectiveness requires focus, and that means one response to the question. . . . Supporting customers are volunteers, members, partners, funders, referral sources, employees, and others who must be satisfied.75 If you didn’t address these questions when you worked on the mission, you have a second opportunity to do so now. More important to preparing your mind for vision making is the third topic of how your customers will change. Here, Peter Drucker is not referring to the lifechanging difference that you make in their lives, but literally to how they will change: Customers are never static. There will be greater or lesser numbers in the groups you already serve. They will become more diverse. Their needs, wants, and aspirations will evolve. There may be entirely new customers you must satisfy to achieve results—individuals who really need the service, want the service, but not in the way in which it is available today. And there are customers you should stop serving because the organization has filled a need, because people can be better served elsewhere, or because you are not producing results.76 But even this doesn’t quite get at customer voice. The most important advice Peter Drucker gives about customers is to stay close to them, which is what customer voice is all about, “Often the customer is one step ahead of you. So you must know your customer—or quickly get to know them. Time

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

93

and again you will have to ask, ‘Who is our customer?’ because customers constantly change.”77 Kristin Majeska, former executive director of Common Good: Investments in Nonprofit Solutions, calls this customer focus, which begins with identifying your customers and ends with researching what they value: Identify your customers. Separate your customers into distinct groups that you can picture, reach, and, above all, understand. Figure out what type of customers you serve most effectively, ask yourself why, and use that knowledge to serve your “best” customers exceptionally well and to improve your service for others. . . . Research—don’t assume you know what customers value. Dig into information sources. Observe. Most important, ask your customers! Listen attentively to their answers and get to know the people who make up your market . . . and who will determine your success.78 One of the best ways to get close to your customers is to do exactly that. Yes, you can commission rich and rewarding research (which is pricey), but one of the most effective ways to understand your customers is to talk with them. I ran a performing arts center for 15 years and though I wasn’t needed at the theatre every night, that’s where you’d generally find me and not standing in the wings, but in the lobby. I knew what our customers liked about our organization and what they didn’t like because I asked them; it was that simple. No wonder that the Victoria Theatre Association’s customer base was the envy of much larger communities and that our renewal rate for subscriptions was regularly 20 basis points higher than most other practices. Our customers really were the stars. What questions should you ask? I like to keep it simple. After introducing myself, explaining what I’m doing, and getting to know the customer a bit, I ask what he or she likes about the product, program, or service they are using. This is a good ice-breaker and the answers can inform your marketing strategies. Then I ask the customer what he or she doesn’t like. Don’t ask what he or she would do to improve this or that aspect of your services, products, or programs because this is hard for them to conceptualize. Though people have a tough time knowing how to improve things, they definitely know what they don’t like. Your customer’s first response may be deferential as most people are as uncomfortable giving honest feedback as they are receiving it. But if you encourage the feedback honestly and persistently, you will prevail. If you are not getting thoughtful answers, something is likely flawed in the way you’re asking the questions. I like to use open-ended questions, those that don’t require a simple yes or no, when I’m trying to get at the customer experience. Be sure to probe answers to get more information.

Chapter = c08

94

Date: Dec 8, 2010

Time: 8:50 am

Strategy

Restate what you have heard to be sure you understand what the customer said and meant. I always ask a third question around what I should have asked, but didn’t, which almost always yields a rich response. The three questions together generate a surprising amount of information if you are patient and listen carefully. A typical interview with a customer should take 20 minutes or so, maybe more if the customer is talkative, maybe less if they’re not. The identification and research of your customers is the first and most important thing you must do to prepare yourself for vision making. What Tom Peters and Robert Waterman say is as true for nonprofits as it is with for-profits, that the “excellent companies really are close to their customers.”79

KNOW THE BEST OF BEST IN YOUR FIELD The rationale for knowing the best of best in your field is elemental according to Marcus Buckingham: “Conventional wisdom tells us that we learn from our mistakes [but] all we learn from mistakes are the characteristics of mistakes. If we want to learn about our successes, we must study successes.”80 The applicability at the organizational level is evidenced by the fact that the most used for-profit management tool in a 2009 study of international executives was benchmarking.81 In terms of definitions, benchmarking is “a systematic, continuous process of measuring and comparing an organization’s business processes against leaders in any industry to gain insights that will help the organization take action to improve its performance.”82 The idea here is that benchmarking any best process at any leading firm, nonprofit or for-profit, leads to specific practices that you can imitate. Knowing the best of best is more focused than benchmarking because you are looking at the best of the best in your field only. It is akin to survivor technique, which “draws upon the notion of survival of the fittest in a competitive environment.”83 You seek out those firms in your field that have survived over the long haul and investigate the sources of their longevity. Then you drill down to find the reasons for their success including processes, structure, governance, lines of business, capital structure, everything, and anything that might be the source of their best-of-best-ness. You are trying to get at the key success factors, which Sharon Oster defines as “those characteristics that are essential to successful performance in that industry.”84 What do you do with all this wonderful information? Why, initiate it of course. Don’t forget that seven out of ten ideas in Amar Bhide’s study of entrepreneur founders came from an earlier job.85 This goes for nonprofits as well. A recent study on nonprofit innovation from Lester Salamon, Stephanie Geller, and Kasey Mengel surveyed 417 nonprofit organizations

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

95

and found the most common way to learn about innovations was from peer organizations.86 By studying the very best in your industry, you’re trying to replicate the experience of working at those agencies and come away with opportunities that might work for you. Some may characterize this as mopping your own floor with someone else’s dirty water as the saying goes. Yes, you are using someone else’s water, but no, it’s not dirty water; it’s very clean—the best water you can find. I worked with an agency that was all about finding the next killer application, that new venture that would take it to the next level. Money was a big issue and discussion turned to how best to amplify earned income. It turned out that the executive director had never looked at the best practices in his field. In his first telephone call, he learned that he was charging 25 percent less than the best practice in his field for an identical service. How can you even begin to think about killer applications without first achieving operational effectiveness? Most of the strategies that you’ll come up with will not be killer applications, at least if the literature on for-profit business launches is any indication. W. Chan Kim and Ren´ee Mauborgne, for example, found that nearly all (86 percent) of new for-profit ventures were “line extensions—incremental improvements to existing industry offerings—and a mere 14% were aimed at creating new markets or industries.”87 Even if you learn nothing in your investigation of best practices, you may at least temper the natural inclination to be overly optimistic. This happens because we tend to overstate our talents, misunderstand the real cause of events, inflate the degree of control we think we have over things, and discount the role luck plays, and we thus fall prey to what Dan Lovallo and Daniel Kahneman call delusions of success.88 In other words, when “pessimistic opinions are suppressed, while optimistic ones are rewarded, an organization’s ability to think critically is undermined.”89

UNDERSTAND YOUR RISKS Peter Brinckerhoff explains why understanding your risk orientation has value: All of us have different genetics when it comes to risk. Some of us thrive on it, some avoid it so adamantly that our behavior becomes risky in itself. Since our organizations are really just groups of people making decisions, this wide variety of risk-taking thresholds extends to our notfor-profits. As a result, some organizations are cavalier in their approach to risk, and some avoid any risk at all costs (even to the expense of the mission) . . . too many not-for-profits let real service opportunities pass because they are not ready to react promptly. Remember that there may be more risk in doing nothing.90

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

96

Strategy

The first thing to do and perhaps the most reliable is to sit down and talk with knowledgeable people. Be sure to include a mix of staff members, board members, funders, and other stakeholders. I like to ask people who are influential enough to champion or obstruct ideas. Discussing what your mission says about your strategies is also a quick test of your risk orientation. Although nonprofits are typically quite risk averse,91 it could be that your board and staff are more comfortable with expansion as opposed to improving operational effectiveness. Another approach is to test your agency against Lilya Wagner and Mark Hager’s 10 symptoms of a dysfunctional organization: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Lack of a strategic plan A narrow fund-raising base Productivity slowdown Staff-board breakdown Fear of change Poor communication Declining morale Financial instability Unhappy customers Loss of key people92

Depending on how you stack up, you may be willing to take more or less risk, focus on operational effectiveness or on new lines of business. Ironically, sometimes the more dysfunctional an agency, the more willing it is to take risk with new ventures. You could also consider Peter Brinckerhoff’s Social Entrepreneurship Readiness Checklist categories: ■

■ ■

■ ■ ■

Mission. Has the idea been reviewed for fit to organization culture and mission? Risk. How much can you tolerate including capital and stress? Systems. Do you have the organizational infrastructure including people and systems? Skills. Does the team have the competencies to succeed? Space. Do you have the physical space? Finance. Do have the means to reach the ends?93

Because financial position tends to have an enormous impact on risk orientation, it is often used as a catalyst for discussions. For example, the following seven questions fall under Peter Brinckerhoff’s finance category from the checklist:

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

Vision Statement

■ ■ ■ ■ ■ ■ ■

97

Have you been profitable the past three years? Do you have 90 days’ cash on hand? Do you a good relationship with a banker? Do you have a line of credit? Do you have a current ratio of 1 or higher? Do you have a debt to net worth of 0.3 or less? Will any funders penalize you for any net income?94

Alternatively, you might consider Howard Tuckman and Cyril Chang’s four operational criteria of financial vulnerability: ■

■

■

■

Inadequate equity. A nonprofit’s ability to temporarily replace revenues is affected by its equity or net worth. Equity is the difference between a nonprofit’s total assets and total liabilities. . . . The assumption is that a nonprofit with a large net worth relative to revenues has a great ability to replace revenue than one with a smaller net worth. Revenue concentration. . . . Revenue diversification is assumed to make a nonprofit less vulnerable. . . . This is because access to multiple funding sources enhances an organization’s chances of being able to balance a gain in one revenue source against a loss in another. Administrative costs. When a financial shock occurs, a third recourse available to nonprofits is to cut their administrative costs. . . . This is because organizations that have low administrative costs are already operating at a point where additional cutbacks are likely to affect the administration of their program. A consequence is that program output will suffer. Reduced operating margins. A nonprofit’s net operating margin (defined as it revenues less its expenditures divided by its revenues) shows the percentage that its profits represent of its revenues. The larger this percentage, the larger the net surpluses a nonprofit can draw down in the event of a financial shock.95

A briefer approach is to test your organization against John Trussel’s assumption that “a charity is financially vulnerable if it has more than a 20 percent reduction in its fund balance during a three-year period.”96 In his study of 94,002 charitable organizations, 17,112 were financially vulnerable (about one in five). He found that financially vulnerable agencies: ■

■

Have more debt (44.52 percent) than those that are not financially vulnerable (31.58 percent) Have a higher concentration of revenues (0.7935) than those that are not financially vulnerable (0.7421)

Chapter = c08

Date: Dec 8, 2010

98

Time: 8:50 am

Strategy

■

■

Have a lower surplus margin (3.46 percent) than charities that are not financially vulnerable (8.52 percent) Are smaller ($268,740 average total assets) than those that are not financially vulnerable ($477,443 average total assets)97

At the risk of stating the obvious, don’t forget to review your lines of business for the possibility that you have too many or too few on your menu. And looking at your success measures in general and the financial ones in the mission measures in particular may give you a good sense of how much risk you can tolerate. Don’t worry about going into too much detail at this point, however. These issues will be reviewed in detail when you begin working on your vision strategies.

Make Your Statement Now that you have a ready mind, you are prepared to set the vision statement. Remember that Results Now splits the vision into two elements: the clear, but broad-stroke picture of the future is the vision statement; the strategies that bring it to life are the vision strategies. The vision statement is a “guidepost showing the way.”98 It doesn’t have to be lengthy or particularly descriptive; it is a guidepost, not a road map. The vision statement tells you what direction you’re heading in; the visions strategies provide the specific directions. When it comes to making the vision statement, it’s all about the questions you ask. Michael Allison and Jude Kaye propose answering 10 questions as part of a visioning exercise: 1. How would the world be improved or changed if we were successful in achieving our purpose? 2. What are the most important services that we should continue to provide, change, or begin to offer in the next three years? 3. What staffing and benefits changes do we need to implement to better achieve our purpose? 4. What board of directors changes do we need to implement to better achieve our purpose? 5. What resource development (fund-raising) changes do we need to implement to better achieve our purpose? 6. What facilities and technology changes do we need to implement to better achieve our purpose? 7. What infrastructure, systems, or communication changes do we need to implement to better achieve our purpose? 8. How could we more effectively or efficiently provide our services? If you could only make three changes that would significantly impact

Chapter = c08

Date: Dec 8, 2010

Vision Statement

Time: 8:50 am

99

our ability to provide quality services to our clients/customers, what would those changes be? 9. What makes us unique (distinguishes us from our competition)? 10. What do our clients/customers consider most important in our provision of services? What do our customers need from us?99 John Bryson uses a five-question process of which the first two are relevant: 1. What are the practical alternatives, dreams, or visions we might pursue to address this strategic issue, achieve this goal, or realize this scenario? 2. What are the barriers to the realization of these alternatives, dreams, or visions?100 Peter Drucker also uses a two-part method when he says that “genuinely entrepreneurial businesses have two ‘first pages’—a problem page and an opportunity page—and managers spend equal time on both.”101 Put simply, what holds you back and what takes you forward? These two questions also implicitly address Michael Porter’s assertion that “Operational effectiveness and strategy are both essential to superior performance.”102 This two-question approach offers a quick, practical, and productive way to begin especially when working with board and staff members in a group setting. Few would argue that a vision statement is an important element of the strategic plan and that the board should be involved in its development. Yet how can we expect that average board member who spends just 12 hours a year around the board table to engage constructively in a task that could have long-term consequences?103 Finding a solution that invites the board’s thoughtful input is important because one of the key ways that the board adds value is to “encourage experimentation, trying out new approaches and alternative ways of dealing with issues.”104 In other words, for the nonprofit organization thirsting for encouragement in its thinking about vision, there may be no better source than the board. The easiest and most effective way to generate opportunities for the vision statement is by gathering your board and key staff members together and asking the following question: What are the major opportunities that will take us forward in the next three to four years? Using the BAM process shown in Appendix A generated the results shown in Table 8.2 for a fair housing agency. Notice that the question of what takes us forward delivered results about lines of business (comprehensive solutions) and also about operational effectiveness (best practice nationally). Paradoxically, the question

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

100

Strategy

TABLE 8.2 Fair Housing Agency Statement Opportunities

Results

– The expert on housing issues, best of, premiere provider of housing discrimination assistance nationally, strong advocacy/enforcer for fair housing in region, regional leader in fair housing, leader in impacting predatory lending in the region, premiere housing opportunities specialists in the region, leading authority and service provider in reducing housing discrimination in the Miami Valley, positive impact on discrimination

Best practice nationally

– Fair housing education before enforcement, proactively address fair housing issues in the community, most comprehensive help solutions to fair housing issues in region – Impact discrimination in community on systemic level, experts on systemic enforcement (Big Bang) – “Go to” place for victims, known as leading agency for foreclosure prevention, nationally recognized organization for dealing with housing discrimination and education, best known expert on housing discrimination – Funding base to allow business line growth

Comprehensive solutions

what takes us forward also answers the question what holds us back. This sort of double-hitter is common because people think differently about the future. Some are solely focused on pragmatic ideas; others think about idealistic possibilities. Henry Mintzberg explains these two types: One is an analytic thinker, who is closer to the convention image of the planner. He or she is dedicated to bringing order to the organizations. . . . The second is less conventional but present nonetheless in many organizations. This planner is a creative thinker who seeks to open up the strategy-making process.105 Fortunately, your board and staff have both of these right- and lefthanded thinkers. And this is why asking the question what takes us forward delivers answers that are both pragmatic and idealistic. Here are vision statements that came from four different agencies using the BAM process: ■ ■

Be the best practice nationally that delivers comprehensive solutions To the next level of excellence through creativity and leadership

Chapter = c08

Date: Dec 8, 2010

Vision Statement

■ ■

Time: 8:50 am

101

The best of all Iconographic

How do you know your vision is on target? Jim Collins and Jerry Porras offer the following checklist of questions to answer: ■ ■ ■ ■ ■ ■

Does it stimulate forward progress? Does it create momentum? Does it get people going? Does it get people’s juices flowing? Do they find it stimulating, exciting, adventurous? Are they willing to throw their creative talents and human energies into it?106

Though the four vision statements certainly meet the test, they are too broad to be particularly actionable. But some organizations stop here. You have an inspiring vision statement, the lines of business, and success measures with targets to help set goals for operations. You can make vision strategies something to be explored when there’s more time next year or even later. There is no problem whatsoever with this. But if you want to start bringing that vision statement to life now, you’re ready for John Bryson’s question: “What major actions (with existing staff and within existing job descriptions) must be taken within the next year (or two) to implement the major proposals?”107 Or more directly, what strategies will bring the vision statement to life in the next few years?

Chapter = c08

Date: Dec 8, 2010

Time: 8:50 am

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

CHAPTER

9

Vision Strategies Vision is the art of seeing the invisible. —Jonathan Swift1

W

ho can forget Jerry Maguire’s two primary strategies to operationalize his vision statement of to be the best versions of ourselves, the elegance and simplicity, the four words of sheer audacity: Fewer clients, less money? As soon as you see the words flash across the screen, you can feel the winds of change blowing. It’s no surprise then when Bob Sugar (played unctuously by Jay Mohr) fires Jerry at a busy restaurant where there’s less chance of a scene. Bob lets Jerry know exactly who’s to blame: “You did this to yourself. You said ‘fewer clients.’ You put it all on paper. . . . You did this to yourself . . . although I do gotta hand it to you. For about five minutes you had everyone applauding smaller revenues.”2 Not that Bob Sugar was right, as Jerry eventually proves. Jerry Maguire instinctively understood that vision statements are valuable for being a guidepost pointing to the future, but without clarity about how to get there, you won’t have much of a chance. That’s why in this chapter, you’ll learn how to make your strategies.

Making Strategies The question to ask here is what strategies will bring the vision statement to life in the next few years, which is a shorter time horizon than the vision statement’s three to four years. Like the vision statement, vision strategies typically revolve around what takes you forward in the form of lines of business and what holds you back in the form of operational effectiveness

103

Chapter = c09

Date: Dec 8, 2010

104

Time: 3:5 pm

Strategy

undertakings. Your efforts to launch a new line of business or increase the number of clients, satisfaction, or price of the services for an existing line of business are strategies. Your recruitment of board members who can open more doors to funding is a strategy; so, too, is a major remodeling that expands your back-office infrastructure. Just who should be tasked with doing the work of identifying possible strategies? Most organizations will use the brainstorming, affinity grouping, and multivoting (BAM) approach with everyone around the table because it is so easy to do and primes the pump, but then delegate enrichment and refinement to the staff. Enriching ideas—including refining and adding to the ideas with new ones—is often necessary because the ideas from the larger group are often quite broad in texture. Thus, typically, the work of enriching these ideas for further discussion and the subsequent feasibility studies is delegated to staff and then brought back to the board for further discussion in an iterative fashion. There are two steps to making your strategies. First, you generate ideas and second, you choose which ones to move forward to more study or implementation.

Generate Your Ideas As is the case with vision, ideas for strategies come from a wide array of methods. Remember Amar Bhide’s study about where entrepreneurs found ideas? Four percent of ideas were found through systematic research, 20 percent were discovered serendipitously, 71 percent came from an idea encountered at an earlier job, and the final 5 percent came from going with the flow of their industry.3 Although hardly inclusive, there are three useful ways of putting together a pool of viable ideas for strategies. First is to mine the information gained from when you were making the vision statement, including readying your mind and the statement itself. Second is to use the BAM process. Third, you can use a variety of questions generated from the earned income literature. No matter what method you use to generate ideas, always keep in mind that strategies sometime appear in very mysterious ways including lucky breaks and “aha” revelations. Other times, strategies become clear as a result of the back-breaking work of analysis. Sometimes you know what needs to be done in your gut; sometimes you have to take a very thoughtful approach. Sometimes an idea comes to you when you’re walking in the neighborhood where your customers live; other times, when you’re enjoying a good bottle of wine or in the middle of the night. Keep in mind that “trying to force an insight can actually prevent the insight.”4

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

Vision Strategies

105

VISION STATEMENT By now you should already have a growing list of ideas that you discovered when you were working on the vision statement in general and readying your mind in particular. Did your reaffirmation of the purpose provide insights on what you should be doing? What about your values and mission relative to the programs you’re doing; is your mission creeping? What about listening to your customers? What about doing more of what they liked? What about addressing the things that they didn’t like? Did you talk to any customers who had given up on your agency? Knowing the best of the best in your field should have given you some potent ideas. Did you go to visit any of them in person? Were there things they were doing that you could adopt? Any things you were doing that they weren’t that you should stop? Don’t forget that the most used source for learning about innovation at nonprofits is from your peers.5 What are your best-of-best peers doing that you should be imitating? When you took time to understand your risk, did any ideas occur to you that you should be addressing? What about the financial vulnerability tests and your lines of business and success measures? In addition to the ideas that might arise from readying your mind, you may have already generated some potent strategies when you did the vision statement itself if you used the BAM process. Take the example of the housing agency that identified four possible ideas as shown in Table 9.1. BAM By far the most popular and efficient approach is using the full group of the board and key staff to generate ideas. And it’s easy to do by using the BAM process beginning with a question as simple as “How will we achieve our vision statement?” Table 9.2 lists the strategies from a museum that did just that. Notice that the first two strategies—financially secure and best attended—are related to operational effectiveness, and the last two— innovative design ideas and leader in learning—are related to lines of business. These ideas were delegated to staff for enrichment that led to the following: ■

Iconographic Financially secure ◦ Boost annual retail sales one third to $100,000. ◦ Advance annual contributed income 50 percent to $300,000. ■ Best attended ◦ Advance the membership base 20 percent per year to 2,246. ◦ Boost attendance for tours 35 percent to 9,500. ■ Innovative design ideas ◦ Open the Design Innovation Campus 2012. ■

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

106

Strategy

TABLE 9.1 Ideas from Vision Statement BAM Process Ideas

Results

– The expert on housing issues, best of, premiere provider of housing discrimination assistance nationally, strong advocacy/enforcer for fair housing in region, regional leader in fair housing, leader in impacting predatory lending in the region, premiere housing opportunities specialists in the region, leading authority and service provider in reducing housing discrimination in the Miami Valley, positive impact on discrimination – Fair housing education before enforcement, proactively address fair housing issues in the community, most comprehensive help solutions to fair housing issues in region – Impact discrimination in community on systemic level, experts on systemic enforcement (Big Bang) – “Go to” place for victims, known as leading agency for foreclosure prevention, nationally recognized organization for dealing with housing discrimination and education, best known expert on housing discrimination – Funding base to allow business line growth

Strengthen the advocacy program

■

Launch fair housing education program

Strengthen marketing capacity

Strengthen fund-raising capacity

Leader in learning ◦ Boost attendance for programs/events to 10,000 by 2011.

GOOD QUESTIONS Questions from the literature on earned income can be particularly stimulating for generating ideas. Working from larger lists to smaller begins with the great Joseph Schumpeter’s five categories6 plus two more from Gregory Dees: Creating a new or improved product, service, or program Introducing a new or improved strategy or method of operating Reaching a new market, serving an unmet need Tapping into a new source of supply or labor Establishing a new industrial or organizational structure Framing new terms of engagement (e.g., customer satisfaction guarantees) 7. Developing new funding structures (e.g., franchising)7 1. 2. 3. 4. 5. 6.

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

107

Vision Strategies

TABLE 9.2 Vision Strategies for a Museum Strategies

Results

– Leading museum worldwide, redevelopment to an organization recognized for design, architecture, programming, and organizational excellence, international recognition, recognized for our programs, iconographic, unparalleled reputation worldwide – Financial security, in place to celebrate the centennial, standard for excellence and financial stability of all sites in the world, financially self-sufficient, financially secure, achieves financial independence, financially stable, wildly financially excellent – Single best attended museum, cultural center for learning, entertainment, and meeting ground, international draw – Unique design leader, innovative design ideas – Education bent, education partnerships especially with universities, catalyst for heightened education pride regionally, leader in learning, driver four community image with regard to schools

Iconographic

Financially secure

Best attended

Innovative design ideas Leader in learning

Gregory Dees goes on to offer seven other questions that can stimulate the process of finding opportunities: 1. How well are you serving your clients, customers, etc.? 2. Are you reaching all of the people you would like to reach? 3. Have the demographics (e.g., age, ethnicity, preferred language, educational levels, incomes, wealth) changed in the community you serve or want to serve? 4. Have social values, moods, perceptions, or politics changed in a way that hampers your effectiveness or creates new opportunities? 5. Are your staff unhappy or frustrated in their work? 6. What kinds of innovations are working in other fields? 7. Do we have any new scientific knowledge or new technology that could improve the way you operate?8 Richard Brewster takes a five-question approach to help your organization identify the “best match between what it does very well . . . and available financial resources and other forms of support”:9

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

108

Strategy

TABLE 9.3 Ansoff Matrix Current Products

New Products

Current Markets

Market Penetration: current products to more customers like current customers

Product Development: new products to current customers

New Markets

Market Development: current products to new kinds of customers

Diversification: new products to new kinds of customers

1. 2. 3. 4. 5.

To modify the nature of a program, particularly to improve quality; To add a new program; To withdraw from programs; To increase the number of people to whom programs are delivered; and To secure more resources.10

A four-question approach is contained in the widely used Ansoff Matrix based on its namesake, who makes the following assertion: “There are four basic growth alternatives open to a business. It can grow through increased market penetration, through market development, through product development, or through diversification.”11 Table 9.3 shows what the Ansoff Matrix looks like. Although there are no hard-and-fast rules about which quadrant is better, diversification is the most difficult to pull off because you are doing something you have never done before. Market penetration is the least difficult because you are doing more of what you’re already doing. In general, market development and product development, which are adjacent to market penetration, are preferable over diversification.12 As Tom Peters and Robert Waterman observed nearly three decades ago, “Organizations that do branch out (whether by acquisition or internal diversification) but stick very close to their knitting outperform the others.”13 Table 9.4 illustrates a different matrix suggested by Scott Helm’s work around earned income strategies:14 TABLE 9.4 Earned Income Matrix Sustaining Strategy

Disrupting Strategy

Earned Income

Commercial Nonentrepreneurial

Commercial Entrepreneurial

Unearned Income

Noncommercial Nonentrepreneurial

Noncommercial Entrepreneurial

Chapter = c09

Date: Dec 8, 2010

Vision Strategies

Time: 3:5 pm

109

Disrupting strategy is sometimes described as nonprofit entrepreneurship, which Scott Helm defines as the “catalytic behavior of nonprofit organizations that engenders value and change in the sector, community, or industry through the combination of innovation, risk taking, and proactiveness.”15 As shown in the matrix in Table 9.3, disrupting strategy need not be profitable and sustaining innovation need not be unprofitable. The earlier case of the outdoor camping agency that raised its camping fees is a perfect example. When I work with agencies on strategy, I often ask that opportunities be generated for each of the quadrants. Because sustaining innovations are typically strongly related to operational effectiveness and disrupting innovations are tied to lines of business, this matrix helps to address what takes us forward and what holds us back. Please remember that the vast majority of the strategies you will identify will not be killer applications. There is nothing wrong with this; most of your low-hanging fruit is of the sustaining variety.16 Though it is true that you become more risk tolerant as you get more desperate (and the more likely you are to try to launch a killer application), your better bet is to stick to your knitting and enhance operational effectiveness.

Make Your Strategies Once you have enough ideas identified—at least eight legitimate ones—you need to cull the list to a manageable number that you can then consider more carefully. You’re trying to get the number of strategies that need to be studied down to two or three. Just how do you choose? It is important to note that half of all decisions in organizations fail primarily because people “impose solutions, limit the search for alternatives, and use power to implement their plans.”17 Thus, Paul Nutt suggests that leaders should “make the need for action clear at the outset, set objectives, carry out an unrestricted search for solutions, and get key people to participate.”18 The way in which vision statements and strategies are finalized and readied for feasibility studies can range from simple to complex, from the “Take it to Vegas” multivoting style in the BAM process to more nuanced ranking matrices, from feasibility studies to full-blown business plans. Interestingly, the exemplars in my study of high-performing executives were quite informal about this matter. Just one way stood out for the participants: “You kick around a final draft of the vision with others including staff and board; it’s a way of floating trial balloons and building ownership.”19

DECISIONS, DECISIONS Many decisions we make are characterized by a “ready, fire, aim” approach so popular especially with entrepreneurs.20 And

Chapter = c09

110

Date: Dec 8, 2010

Time: 3:5 pm

Strategy

why not? In his bestselling book, Blink, Malcolm Gladwell argues that our snap judgments can be every bit as good as those decisions we carefully deliberate. Much of this is due to thin slicing, which is the ability to size up a situation quickly with very little information.21 It turns out that snap judgments based on thin slices aren’t all that astonishing. When studying chess masters who simultaneously play many opponents, make split-second moves, and beat all comers, Herbert Simon found that the experience and learning from a lifetime of playing makes this possible; intuition is simply another word for vast experience, for “analyses frozen into habit.”22 All things being equal, we human beings prefer the intuitive to the analytic. An analytic approach greatly improves accuracy, but “the gain in precision which accompanies an analytic approach to decision-making strategy may be offset by the danger of extreme error.”23 In other words, when we use an analytic approach, we are either perfectly right most of the time or we are utterly wrong. Intuitive decision makers, however, are approximately correct all of the time without the extreme errors, which is perhaps why the only time we use analytic techniques is when we cannot use our intuition. The idea that we’re one or the other, analytic or intuitive, is often referred to as left brain versus right brain, or as Dorothy Leonard and Susaan Straus describe, “An analytical, logical, and sequential approach to problem framing and solving (left-brained thinking) clearly differs from an intuitive, values-based, and nonlinear one (right brained thinking).”24 Whatever you call it, left-brained or right, intuitive or analytic, all decision making—and research, for that matter—are subject to misinterpretation and misperception: We are predisposed to see order, pattern, and meaning in the world, and we find randomness, chaos, and meaninglessness unsatisfying. Human nature abhors a lack of predictability and the absence of meaning. As a consequence, we tend to “see” order where there is none, and we spot meaningful patterns where only the vagaries of chance are operating.25 Though simple matters are best decided through conscious thinking, we should “delegate thinking about complex matters to the unconscious.”26 In other words, let the decision simmer: Use your conscious mind to acquire all the information for making a decision—but don’t try to analyze the information. Instead, go on a holiday while your unconscious mind digests it for a day or two. Whatever your intuition then tells you is almost certainly going to be the best choice.27

Chapter = c09

Date: Dec 8, 2010

Vision Strategies

Time: 3:5 pm

111

Like so many things in life, the resolution to the question of analytical versus intuitive is paradoxical. It is both/and as opposed to either/or. Analysis and intuition go hand in hand. As Dorothy Leonard and Susaan Straus put it, “Rightly harnessed, the energy released by the intersection of different thought processes will propel innovation.”28 And as Herbert Simon argues, the effective manager must be capable in both decision making approaches—the analytic and intuitive.29 In other words, use your head and your gut, but don’t trust either exclusively. Of course, individuals do not make decisions in a vacuum when it comes to organizational life. As such, the issue isn’t so much what side of your brain to use, but who you should involve. One well-known decision model uses the need for acceptance and quality of decision as one of the key situational variables in deciding who should be involved. Gary Yukl’s modification of Victor Vroom and Phillip Yetton’s model30 is a simplified version that has three primary variables—decision acceptance, decision quality, and save time—and three decision-making styles—autocratic, consultation, and joint decision.31 John Kotter and Leonard Schlesinger also use time as the key variable when offering their continuum that goes from “a very rapid implementation, a clear plan of action, and little involvement of others [to] a much slower change process, a less clear plan, and involvement on the part of many people other than the change initiators.”32 If you need lots of acceptance, go slower; if you don’t need it, go as fast as you want. When it comes to directive versus participative, some people argue that the latter is the only way to go. Indeed, many leaders in the nonprofit sector avoid directive (also called autocratic) decision making on principal.33 Wilfred Drath for example condemns the John Wayne directive style, but he recognizes the difficulties of participative approaches including the limitations of too many chefs in the kitchen and diffused accountability.34 The Chinese proverb really is true, “A courtyard common to all will be swept by no one.” Thinking that participative approaches are the only way to go is not necessarily supported in all situations. Gary Yukl, for example, warns that the lack of “consistent results about the effectiveness of participative leadership probably means that various forms of participation are effective in some situations but not in others.”35 Recognizing this explicitly is Henry Mintzberg, who says that in times of crisis, people not only expect directive leadership, they demand it. Because the organization “must respond quickly and in an integrated fashion, it turns to its leader for direction.”36 But planning is not typically done during crisis, so this suggests a more participative approach that will likely be at least somewhat analytical and thus take longer. Now that you know whether to follow your analytical or intuitive inclinations (do both) and who to involve in the decision-making process

Chapter = c09

112

Date: Dec 8, 2010

Time: 3:5 pm

Strategy

(it depends), you’re ready to choose the one or two good ideas that are worth further consideration.

START AND STOP Although it may seem obvious that you should put everything on the table when working on your vision strategies, do not forget that stopping things you are currently doing is a very potent strategy itself and that includes lines of business. A strategy analysis I conducted recently for a very small agency identified 20 strategies including six current ones, eight in various stages of exploration, and 10 new ideas. All of these strategies were evaluated by the board and staff, and the decision was made to reduce the volume to nine strategies total, including scrapping four current lines of business. The process of reaching this decision included qualitative interviews with the key decision makers and quantitative rankings in person and through the web. The specific lesson of this example is that every strategy you are currently doing—those you’re investigating—and those slated for the future should be under consideration when deciding what goes forward. Why is this so, so important? In the last two years, 68 percent of the nonprofits in a study on innovation were unable to move their ideas forward. The four most salient obstacles were related to funding including lack of funding, growth capital availability, narrowness of government funding streams, and foundations that encourage innovation but don’t sustain it.37 When we want a ready source of funding, our eyes commonly look outside of the agency and toward our funders for support. Sometimes we’ll also cut costs through things like negotiating for lower rent or cutting overhead. There’s nothing wrong with this, but we often overlook a readily available source of funding and a quick boost to operational effectiveness, which is to eliminate underperforming or inconsequential lines of business. Beware the sunk cost fallacy, also known as escalation of commitment, which causes people to actually increase their investment in a course of action because of what they’ve put into it and despite knowing it is a lost cause.38 Be open to the idea of shutting strategies down including complete lines of business. You cannot be all things to all people. It is certainly true that competitive advantage is all about how you are better than your rivals. Having more lines of business than any other agency may accomplish this, but it’s not likely to be viable for the long term. The essence of strategy may indeed be “choosing to perform activities differently or to perform different activities than rivals,” but this doesn’t mean doing everything for everyone. What then is the essence of strategy? Remember the words of Michael Porter, “The essence of strategy is choosing what not to do.”39

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

113

Vision Strategies

TABLE 9.5 Growth-Share Matrix

Business Growth Rate

Relative Competitive Position (Market Share) High

Low

High

“Stars”

“Question Marks”

Low

“Cash Cows”

“Dogs”

Before you make your decision about which—if any—of the strategies, including those you are currently doing and those you might want to do, take time for portfolio analysis. These tools include simple ones like the ubiquitous Growth-Share Matrix from the Boston Consulting Group shown in Table 9.5.40 There are many variants to this simple, four-quadrant matrix. One of the most useful is the Portfolio Analysis Matrix from Robert Gruber and Mary Mohr41 that some people call the Double Bottom Line Matrix shown in Table 9.6. A more nuanced three-step portfolio analysis tool is the MacMillan Product Matrix shown in Table 9.7.42 In step 1, you determine program attractiveness on the basis of internal fit (mission congruence, competencies, overhead sharing) and external fit (support group appeal, fundability and funding stability, size and concentration of client base, growth rate, volunteer appeal, measurability, prevention versus cure, exit barriers, client resistance, self-sufficiency orientation of client base).

Financial Returns

TABLE 9.6 Double Bottom Line Matrix Positive

Sustaining (Necessary evil?)

Beneficial (Best of all possible worlds)

Negative

Detrimental (No redeeming qualities)

Worthwhile (Satisfying, good for society)

Low

High Benefits (Social Value)

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

114

Strategy

TABLE 9.7 MacMillan Product Matrix Step 1 Determine Program Attractiveness High

Low

Step 2 Determine Alternative Coverage High

Low

Aggressive Aggressive Step 3 Strong Competition Growth Determine Competitive Aggressive Build Strength Position Weak Divestment or Sell Out

High Build Up the Best Competitor Orderly Divestment

Low Soul of the Agency Foreign Aid or Joint Venture

Step 2 is to determine alternative coverage, which simply means the number of agencies with similar programs. In step 3, you determine competitive position, which requires “some clear basis for declaring superiority over all competitors.”43 By following these steps, you are to locate your program within the corresponding cell and take the recommended action. Whether or not you use matrixes to evaluate your mix of lines of business, you must evaluate them all. Unless there is a good reason for continuing low contributors to your mission and your bottom line, you need to be willing to let go. The only reason not to let go is that you’re the only one serving that particular market and you have a strong competitive position, what MacMillan calls the soul of the agency. I call it the starfish, which is based on the story of a little girl on the beach after a big storm who is throwing stranded starfish back into the surf. A woman walking by stops and says, “Can’t you see that there are thousands of starfish on the beach? What difference can saving just a few possibly make?” The little girl bends down and throws another starfish, smiles, and replies, “It made a difference to that one.”

FAST AND SLOW It takes time for things to percolate, which is why time is one of the key situational variables when it comes to decision-making style. Herbert Simon offers two decision-making approaches that are temporal in texture: logical decision making is where “goals and alternatives are made explicit [while] judgmental decision making [is where] the response to the need for a decision is usually rapid, too rapid to allow for an orderly sequential analysis of the situation.”44 Among the fast methods for deciding are the weighted “Take it to Vegas” multivoting approach discussed in Appendix A, but it’s not the only one.

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

115

Vision Strategies

TABLE 9.8 Payoff Matrix Easy to Implement

Tough to Implement

Small Payoff

Quick Wins! (QW)

Time Wasters (TW)

Big Payoff

Bonus Opportunities (BO)

Special Efforts (SE)

Another quick tool is the Payoff Matrix, popularized at General Electric and shown in Table 9.845 A different matrix for quickly comparing ideas is shown in Table 9.9. You start by choosing one idea and immediately give it the top ranking. You then add a second idea and compare the two, and so on. By the time it’s done, you’ve compared a large number of ideas quickly. The key complaint about these types of approaches is that they are too simple, but they do offer a quick way to winnow out the ideas not worth pursuing. A slower and perhaps more nuanced method to rank strategies is one suggested by Burt Nanus.46 Step 1 is to decide what decision criteria you’ll use. Next, you can weigh the importance of each criterion. Third, you vote and tally. Table 9.10 is the output from a ranking of lines of business against weighted decision criteria chosen in a BAM process at a human service organization. You can use a matrix like this and include your values, your mission including customers, difference, and advantage; you can use the results from the question what holds you back. The nice thing about this method is that you are forced to think about the criteria that matter, which may help prevent

TABLE 9.9 Reverse Matrix Ideas A B C D E F

Ranking 1

1

2

3

3

4

2

3

4

4

5

1

1

1

2

2

2

3

5

6 1

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

116

Strategy

TABLE 9.10 Weighted Decision Matrix Strategies Decision Criteria

WT

A

B

C

D

E

F

G

H

Plays to strengths

10

41

63

69

75

70

65

57

46

Growth potential

9

90

90

90

63

90

63

54

63

Profitable

10

60

80

50

40

90

20

40

40

Responds to threats

10

22

52

50

28

33

23

25

24

Consistent with values

10

77

75

77

85

77

85

81

88

Minimizes obstacles

10

25

36

36

30

38

10

27

27

5

25

10

20

10

35

20

45

40

Something extraordinary

10

40

90

90

80

80

100

30

60

Drives and motivates

10

60

70

80

60

100

60

90

50

Mission fit

10

56

40

48

80

64

72

72

64

496

606

610

551

677

518

521

502

Achievable

TOTAL

our altogether too human tendency to fit data to the decision we were going to make in the first place. The trick is not to make your final decisions at this stage, but to reduce the volume to a more manageable amount. Whatever method you choose to decide, the question is not so much about which idea is the best as much as it is about which ideas are weakest. After all, and as Michael Porter says, “The essence of strategy is choosing what not to do.”47 How many potential strategies get taken forward for deeper investigation depends on your tolerance for work. Still, it is uncommon to have to study more than one or two. You can’t do everything and meritorious ideas can always be revisited in the future. Remember that an organization with just a few vision strategies will do better at achieving them than one with many. Focus is everything.

What Next Now that you’ve winnowed down the field of strategies, you may be ready to investigate the ones that are still on the table, test them in the marketplace with a small experiment, implement them fully without hestitation, put them on the back burner until a later time, or even forget about them forever.

Chapter = c09

Date: Dec 8, 2010

Vision Strategies

Time: 3:5 pm

117

For purposes of this book, however, let’s assume that you want to investigate them for future action of one sort or another. Your goal in the words of Peter Brinckerhoff is to answer the following question, “Can we provide this service (or make this product) in this market, at this price, with the resources we can muster, and meet both our mission and financial goals.”48 The task of getting an answer is typically delegated to staff members and then brought back to the board for further discussion and eventual finalization. There are two stages to this task. First Cut is where you take a relatively shallow dive to see whether it makes sense to proceed to the Final Answers, where you go for a deeper dive. The First Cut is a vetting process to reduce the volume of strategies to a smaller number, perhaps moving down to one or two. Following these studies, vision strategies are sometimes packaged into formal business plans for board approval and then pitched to funders and stakeholders. Sometimes the business plan step is skipped and the vision strategies are integrated into the Results Now master plan that the board then votes on. It is very important to note that these two stages—First Cut and Final Answers analyses—often become Operating Plan goals themselves for the coming fiscal year. Because most organizations take this path, you’ll find more detail in Appendices B and C. Furthermore, not everything suggested in these two stages will apply to all types of strategies because much of the content comes from the earned income literature. There is enough information, however, to be valuable without regard to whether your strategy is about what takes you forward or what holds you back. Use what works for you; discard what doesn’t.

Chapter = c09

Date: Dec 8, 2010

Time: 3:5 pm

Chapter = Part IV

Date: Dec 7, 2010

Time: 9:5 am

PART

IV

Operations If you cry “forward,” you must without fail make plain in what direction to go. —Anton Chekhov

STRATEGIC PLAN OPERATING PLAN Where to go tomorrow? What gets done today? Lines of Business Goals Success Measures Budget Vision PURPOSE Why? Delegation Accountability Who does what? When did it happen? Agendas Duties Assessments Guidelines GOVERNANCE PLAN

W

hen Jerry Maguire is fired by Bob Sugar, they both scramble to get back to the office—Jerry to keep his clients, and Sugar to take them away. Jerry is up against a formidable challenge. He’s striking out on his own without the muscle of Sports Management International behind him. As the afternoon wears on, Jerry loses all of his clients except for Rod Tidwell, a wide receiver for the Arizona Cardinals. In addition to Tidwell, Jerry has a chance at Frank Cushman, the college star quarterback who is expected to be the number-one choice in the NFL draft, but he loses him in a backstabbing move by Cushman’s father and Sugar. The biggest mistake Jerry makes in the Cushman debacle is to try to get a quarterback on his roster at all. If you want payback for the

119

Chapter = Part IV

120

Date: Dec 7, 2010

Time: 9:5 am

Operations

money, stick with the linebackers: “You want to use a first-round draft pick on a player who will have an immediate impact on your team? Go with a linebacker. You want to use a first-round draft pick on a player who will promptly establish himself as a difference-maker? Go with a linebacker.”1 The linebackers are big, tough, down in the dirt; they’re not as flashy or as well compensated as the backfield, where the quarterback and crew take the glory. Maybe that explains why the number-one first-round NFL 2010 draft pick was a quarterback, but numbers two and three were offensive tackles. Of the top ten picks, only one was a quarterback and six were on the line. So what does this have to do with Results Now? Simple: If the strategic plan is the quarterback of Results Now, the operating plan is the linebacker. At its core, the Results Now operating plan is about goals, which are “the future outcomes (results) that individuals, groups, and organizations desire and strive to achieve.”2 Goals can take a wide variety of forms; they can be “implicit or explicit, vague or clearly defined, and self-imposed or externally imposed. Whatever their form, they serve to structure employee time and effort.”3 The operating plan answers what gets done today through goals to be accomplished in the next 12 months, which is entirely different from the strategic plan that addresses where to go tomorrow. This is not an earthshattering concept, according to Leonard Goodstein, Timothy Nolan, and William Pfeiffer: “Strategic planning, in and of itself, is an academic pursuit, of little direct use to any organization. The payoff of strategic planning is in its application, in the execution and implementation.”4 Call it what you will, be it tactical plan, implementation plan, or operating plan, but execution matters a lot. “No worthwhile strategy can be planned without taking into account the organization’s ability to execute it,”5 say Larry Bossidy and Ram Charan. That said, you won’t find a lot of ink spent on operating plans in most books on planning. For example, in Michael Worth’s quite thorough text on nonprofit management, the operating plan merits just one lonely paragraph in a nearly 400-page book that largely focuses on the role of the executive director: This will include indentifying specific tasks to be completed, establishing a timeline for their completion, assigning responsibility for each task, identifying the resources that will be needed—human and financial, determining the right organizational structure, identifying what information systems will be required, defining measures by which the competition or success will be determined, and other operational details.6

Chapter = Part IV

Date: Dec 7, 2010

Operations

Time: 9:5 am

121

This is pretty much the same content as you would find in the for-profit sector. Here’s how Larry Bossidy and Ram Charan describe the role of the chief executive: In the operating plan, the leader is primarily responsible for overseeing the seamless transition from strategy to operations. She has to set the goals, link the details of the operations process to the people and the strategy processes, and lead the operating reviews that bring people together around the operating plan. She has to make timely, incisive judgments and trade-offs in the face of myriad possibilities and uncertainties. She has to conduct robust dialogue that surfaces truth. And she must, all the while, be teaching her people how to do these things as well. . . . It’s not just the leader alone who has to be present and involved. All of the people accountable for executing the plan need to help construct it.7 One of the reasons that less attention is paid to the operating plan is that it is a logical extension of the strategic plan, where you’ve invested lots of intellectual capital. “It’s all over except for the shooting,” as the old saying goes. You’ve decided where to go tomorrow, now it’s a relatively simple matter of laying out the various things that need to be done (goals) and price it out (the financials). The operating plan certainly is the linebacker of Results Now and accomplishes many of the same purposes, but it only goes to the line of scrimmage for major plays. You remember that Results Now gets much of its quickness and flexibility by paying attention to the Pareto Principle, the 80/20 rule, where 80 percent of your results are delivered by 20 percent of your efforts. What this means is that when it comes to operating plan goals, only the major ones that will deliver high payback are included. None of the job duties, the “continue to do this and that” stuff, the job descriptionlike goals that typically are part and parcel of most operating plans are included. Now, take a deep breath here, step away, and remember that nearly 30 percent of all nonprofit agencies have one full-time employee or none at all; half have five or fewer.8 So forget about the 80/20 rule when it comes to available time and substitute the 95/5 rule, where staff members have already committed 95 percent of their time to ongoing activities and have only 5 percent of disposable time—if that. That’s why only the major, highimpact goals are in the operating plan, and if this means that there are only one or two goals or none at all for a particular department, so be it. The operating plan is generally the work of the staff with the exception of goals that pertain to the board. As opposed to the often creative process that characterizes the strategic plan, the operating plan is developed in a

Chapter = Part IV

122

Date: Dec 7, 2010

Time: 9:5 am

Operations

more mechanical, step-by-step approach to render the two sections of goals and budget. To pull it all together, the vision statement expresses the major opportunities that will take you forward in the next three to four years. The vision strategies are what will bring the vision statement to life in the next few years. The operating plan goals address what will be done in the coming year to achieve significant results now.

Chapter = c10

Date: Dec 8, 2010

Time: 9:28 am

CHAPTER

10

Goals We can’t cross a bridge until we come to it; but I always like to lay down a pontoon ahead of time. —Bernard Baruch

C

all it an objective, tactic, or target—an operating plan’s goals should do just one thing: achieve significant results now. In the case of the operating plan with its 12-month time span, that result is typically a major improvement or innovation for the organization that is typically related to the strategic plan. Goals in the operating plan do not describe the ongoing day-to-day activities of the organization or the job duties of individuals; goals are not a policies and procedures manual and they are not job descriptions. Simply choosing a clear and difficult goal is not enough; it must also achieve a significant result for the organization in general and the department specifically. What does significant mean? Obviously, this will differ from organization to organization and depend upon the specific circumstances. In the recent economic turbulence, for instance, many nonprofits found a decline of 10 percent in fund-raising results a significant accomplishment. Significant is not typically incremental, ongoing, common, or run-of-the-mill. Though goals in the operating plan are not about continuing operations, they must respect the reality of the regular work that people do each and every day. Almost all of your time is consumed by regular job duties or the inevitable and unexpected things that come up. You must find the time you need to implement a goal in the same workweek that you use to get your job done. That’s why it is unusual for any department to have more than two or three meaningful goals in any given year. This means that a department with seven meaningful and challenging goals may fail with five due to lack of organizational capacity. In fact, it

123

Chapter = c10

Date: Dec 8, 2010

124

Time: 9:28 am

Operations

is common for some departments to have no goals at all for a particular year. This situation might arise for a variety of reasons such as new staff, because day-to-day activities in a particular department are currently too time consuming, or because the department has just concluded a major improvement project. The degree of involvement from the board in developing goals is usually very limited. In some nonprofits, the board never sees the goals; in others, the board receives this information as a matter of practice, but doesn’t participate. I personally like to show the goals in all their glory, as it can implicitly reassure the board that the staff is on their game. In smaller organizations with limited staff, the board may be very involved in setting goals. Whatever fits the organization at its particular time and place is agreeable, but there needs to be careful consideration of the fine line between advice and instruction and the covenant to respect the chain of command between the board, the executive director, and the professional staff. There are many ways to develop operating plan goals. Just keep the following in mind, “Clear and challenging goals lead to higher performance than do vague or general goals . . . goals that are difficult, but not impossible lead to higher performance than do easy goals.”1

Making Goals Organizational Chart Because accountability is critical for success, the first step is to clarify who is going to be responsible for achieving the goals. One way is to simply make a list of all the people who work at the agency—paid or unpaid, employee or volunteer—and go from there. Another way is to review your strategic plan to be sure there is someone who will stand behind each and every element. This is all well and good provided you have people covering all the bases, including ones not in the strategic plan. But how do you know whether you have all the bases identified? And what if there’s a base to be covered, but no one assigned to it? One way to be sure is to make an organizational chart, which I sometimes call a function map. Rather than building it around job titles and specific people, as is usually the case with traditional approaches, you build the organizational chart around functions that must exist for the organization to be successful, even if these functions do not have people assigned to them. In reality, job titles and department boundaries have less meaning in many nonprofits because people have job duties that cross multiple functions. Since most nonprofit organizations are lean in terms of hierarchy, it

Chapter = c10

Date: Dec 8, 2010

Time: 9:28 am

125

Goals

Board Executive Director

Administration

Marketing

Development

High School Mentoring

Programs

Core Match

Recruiting

FIGURE 10.1 Big Brothers–Big Sisters Department Map

is common for people to do many different jobs. The bookkeeper does the budgets and answers the phones; the executive director handles governance, fund raising, and programming, and turns out the lights at the end of the day. Take the many smaller nonprofits that depend on charitable contributions. It is unlikely that there will be a full-time development director on staff, but someone somewhere is or should be raising funds whether it is a board member, the executive director, or an independent contractor. By making sure that the development function is identified in the organizational chart, it is much more likely that goals related to fund raising will be articulated. In this way, your organizational chart reminds you of what must be done in terms of functions whether or not there are people currently working in that area. And if there aren’t any people there, guess what your goal will be for that function area? That’s right: Recruit someone to take accountability, develop the goals, and get them done. Figure 10.1 is a simple organizational chart for a Big Brothers–Big Sisters chapter. Figure 10.2 is a department map from a county child services agency with a budget in excess of $50 million.

Board of Directors

Planning and Programs Committee

Resources Committee Executive Director

Fiscal Services

Public Human Legal and Risk Organization Relations and Resources and Management Research and Training Administration Evaluation

FIGURE 10.2 Child Services Department Map

Social Services

Chapter = c10

Date: Dec 8, 2010

126

Time: 9:28 am

Operations

The noticeable question here is whether these examples are too simple. Remember that the organizational chart is a tool for determining the necessary functions that will guide the setting of goals; it’s not for show-and-tell. You can build your organizational chart in a number of ways. First, you could start with your IRS 990 and use its three functional expense categories of program service, management and general, and fund raising. You could then comb through the specific line items to see what fits. Second, you could use the BAM process and ask what tasks must be done for the agency to be successful. Affinity-group the ideas and you have the function areas. Third, you could talk to the best of best in your field or go to your peers locally. What happens to the organizational chart once you’re done making your goals? You can throw it away if you’d like and do a new one the next time you need it. You can hold on to it and put it in the master plan, which can help board and staff members see how things are organized. I prefer the latter simply because it makes people smarter to know how things fit together. Whatever you do, don’t go overboard with the organizational chart and include every nook and cranny; keep it as simple as possible, but not simpler.

Goals When it comes to building goals, John Bryson’s final two questions of his five-question strategy-development process apply: 1. What major actions (with existing staff and within existing job descriptions) must be taken within the next year (or two) to implement the major proposals? 2. What specific steps must be taken within the next six months to implement the major proposals, and who is responsible?2 These two questions represent goals and action steps, respectively, typically for the coming fiscal year. Not all goals have action steps, but many do. More specifically, the question to be answered is what will be done in the coming year to achieve significant results now.

GENERATE YOUR IDEAS There is a variety of ways to generate goals. The first and best place to look for operating plan goals is the strategic plan’s success measures and vision strategies. Indeed, if you’ve done it right, much of the work of setting goals is already done. That’s because success measures already come with goals built in. Remember that each success measure not only includes the past and the present, but also includes the future of at least one year. Look at the example shown in Table 10.1 from a performing arts center development department.

Chapter = c10

Date: Dec 8, 2010

Time: 9:28 am

127

Goals

TABLE 10.1 Performing Arts Center Development Success Measures This Year (in thousands)

Year 4

Year 3

Year 2

Year 1

Budgeted

Forecast

Next Year

Total Raised Annual Annual Fund Government Leadership Legacies Sponsorship

1,560

1,680

1,740

1,670

1,710

1,730

1,930

280 258

332 279

360 391

390 385

370 363

440 290

425 345

18 1,020

20 1,070

22 986

22 892

26 981

30 1,000

26 1,160

The obvious choices for focus would be sponsorship that is set to rise 16 percent and the annual fund at 19 percent. These two targets are in the clearly significant category if the demarcation point is 10 percent as Michael Tushman, William Newman, and David Nadler suggest in their statement that “almost any organization can tolerate a 10 percent change.”3 But only the people close to the ground in that agency can determine what is significant and what isn’t. For example, sponsorships for next year might already be in place and there is no goal necessary. Table 10.2 is a different example from a Big Brothers–Big Sisters chapter. Clearly the 33 percent boost from 75 to 100 for Little Sisters Inquiries could be a significant goal. Perhaps the effort expended to make that happen will be intense or maybe it will happen naturally due to a board member’s connections. As noted earlier, sometimes just to stay even or a decline in a measure can represent a significant goal. The point is that the success measures often contain important goals if you just look for them. Even so, not all departments will find goals in the success measures. It is unlikely, for example, that the human resources department will have any relevant success measures. The other place to look for readily available goals is in the vision strategies. Take a vision strategy from a housing agency to stabilize contributed income at $150,000 per year by 2013. In year 1, you may need to enhance the infrastructure in the development department or make your first hire TABLE 10.2 Big Brothers–Big Sisters Chapter Success Measures

Bigs—Inquiries Applications Completed Little Sisters—Inquiries Applications Completed

Year 3

Year 2

Year 1

This Year

Next Year

352 120 54 33

319 176 33 42

610 229 50 42

400 200 75 60

400 200 100 85

Chapter = c10

Date: Dec 8, 2010

Time: 9:28 am

128

Operations

TABLE 10.3 United Way Obstacles Obstacles

Results

– Lack of education about United Way, perception, lack of understanding of need, times are good, apathy towards giving, confusion of terminology, communication, lack of clarity, marketing and communications message – Left behind by technology, stagnation of United Way – Inefficiency of not giving directly, community foundation, watch market share, competition for funds, give directly, unpredictability of donor choice – Number of volunteers, quality of leadership, less volunteer time – County perspective versus regional perspective, changing employee base, lack of county involvement, limited service delivery – Changing companies, lack of corporate pledge increases, employer ratio, economic realities of community, lack of leadership giving expertise – Agency versus United Way attitudes

Lack of clarity in the community about United Way

Stagnation Competition for funds

Availability of volunteers County perspective versus regional needs Economic environment

Agency relations

an administrative assistant. In year 2, the development department might need to secure some percentage of funding and the finance department may need to determine how to invest those funds. Another place to seek out goals is in obstacles, which is especially useful for departments that have difficulty finding possibilities in the success measures and vision strategies. Obstacles are anything that impedes success or that stands in the way of getting things done. Obstacles are everywhere, and every organization has its fair share of them. Look at identifying obstacles as opportunities to finally remove them. Table 10.3 shows the organizational-level obstacles identified by a United Way agency using the BAM process. The department in search of obstacles should list as many of them as possible. Completing the following sentence is a good way to being: “If there were just one thing I could fix that would make things work a lot better, it would be . . .” Once done, grouping the answers around common themes will help eliminate duplication. Once you have identified the obstacles, prioritize them by choosing the most actionable. Not everyone is comfortable with the search for problems, as it has a decidedly negative texture. In other words, some people become justifiably defensive. Instead, you can change the terminology to a review of best wishes. Instead of asking, “What is wrong with our department that we’d

Chapter = c10

Date: Dec 8, 2010

Goals

Time: 9:28 am

129

like to fix?,” change it around a bit and ask, “If I had just three wishes for this department, what would they be?”

MAKE YOUR GOALS Making your goals begins with deciding which of the ideas generated are worthy of pursuit. Return to Chapter 9 for the tool kit on decision-making methods. Once you’ve decided what you’re going to do, you need to put the goals into proper form. One popular (and perfectly usable) approach is the SMART method, which originally stood for specific, measurable, assignable, realistic, and time related.4 These days, the permutations are almost limitless, including simple or stretching; motivational or meaningful; agreed upon, attainable, or ambitious; relevant or rewarding; and trackable or tangible. So complicated and often confusing is the SMART method that some use the DUMB approach, which is short for doable, understandable, manageable, and beneficial. Others say it means dreamy, unrealistic, motivating, and bold.5 A simpler approach to goal setting advocated by Don Hellriegel and John Slocum is to focus on challenging goals that have three elements. First, challenging goals have clarity, which means that the goal taker will “know what is expected and not have to guess.”6 Second, goals should be difficult to achieve, which means that the goal “should be challenging, but not impossible to achieve.”7 The implications of clarity and difficulty are clear: Employees with unclear goals or no goals are more prone to work slowly, perform poorly, exhibit a lack of interest, and accomplish less than employees whose goals are clear and challenging. In addition, employees with clearly defined goals appear to be more energetic and productive. They get things done on time and then move on to other activities (and goals).8 Self-efficacy, the third required element, refers to a person’s “estimate of his or her own ability to perform a specific task in a specific situation.”9 This is not about ability, but is about your belief in yourself. Though self-efficacy begins with the self, it is heavily influenced by the person you report to. Or as J. Sterling Livingston, the author of a classic on the subject of expectation effect, puts it, “A manager’s expectations are key to a subordinate’s performance and development.”10 Of course, setting clear and challenging goals that people believe they can achieve is just the beginning. The goal taker must be motivated to achieve the goal, which depends upon the following: a. The individual believes that the behavior will lead to outcomes. . . . b. The individual believes that these outcomes have positive value for him or her. . . .

Chapter = c10

Date: Dec 8, 2010

130

Time: 9:28 am

Operations

c. The individual believes that he or she is able to perform at the desired level. . . .11 Obviously, no amount of motivation is of any value if the goal taker doesn’t have the abilities required to achieve the goal. In other words, attitude is no replacement for skill set. Most certainly, those who are tasked with achieving the goal must accept the challenge. One of the easiest ways to do this is to involve the goal taker in the process because “positive goal acceptance is more likely if employees participate in setting goals.”12 Provided that the goals we set are within our reach but outside our grasp and there is the presence of positive incentives along with genuine acceptance developed through a participatory process, better performance will likely result. What about goals at the board level; who should be responsible for setting these? Though the board is perfectly capable of setting goals and determining results, it is not in a position to do the work. Because it exists only when it is in session, the board must delegate implementation to others, including officers, committees, and board members. For example, the board might be interested in having a compensation study conducted for the key employees, but it would likely delegate this to officers or the executive committee. A properly formatted goal begins with an action verb and is followed by a noun, measurable results, the person(s) responsible, and the completion date. One way to address this is to simply build the measurable results right into the goal: Increase annual giving $15,000 (ML 5/1). An even better approach: increase annual giving 20 percent to $15,000 (ML 5/1). Some people want more definition about implementing goals than the goal itself. It’s one thing to say that you want to make the department more efficient by going paperless in six months; it’s quite different to know what action steps to take. Here is a useful template for action steps related to improvement-oriented goals: 1. Determine problems that need to be fixed including the root causes. 2. Develop possible alternatives including best practices from other organizations. 3. Decide best alternatives including determining what could go wrong. 4. Draft an implementation plan, including specific completion dates and people responsible. To find the action steps for starting something new like a line of business or an endowment or capital campaign, you simply start with step 2. Take the goal about going paperless, for example. It is clearly about improving something so go with the longer template:

Chapter = c10

Date: Dec 8, 2010

Time: 9:28 am

131

Goals

Go paperless (ML 6/30) 1. Determine problems for going paperless, including the root causes (ML 1/15). 2. Develop possible alternatives including best practices from other organizations (JG 2/1). 3. Decide best alternatives including determining what could go wrong (CC 3/1). 4. Draft an implementation plan, including completion dates and people responsible (4/15). Here are the goals and action steps for the development department of a performing arts center: 1. Develop and implement a major gift strategy to raise at least $15,000 from at least 10 new members at the President’s Circle level (WM/WB 6/30). a. Identify and solicit President’s Circle prospects using Target Solutions data when applied to Raiser’s Edge (WM 9/15). b. Write a specialized appeal letter for board members to encourage an increase in giving (WM 10/15). c. Hold at least two cultivation events for donors (WB/WM 6/30). 2. Develop Corporate Partner campaign to increase giving by $27,500 (WM 6/30). a. Send corporate partner mailing by 12/1 to current and lapsed donors (WM 12/1). b. Identify prospects from outside lists and Target Solutions data (WM/WB 12/1). c. Ensure that prospects are solicited and closed (WM 6/30). 3. Research and cultivate companies of new vendors and/or board members to raise at least $10,000 in new sponsorships (CP 6/30). a. Send letter to each company (CP 9/15). b. Schedule cultivation visits (CP 9/30). c. Meet, cultivate, and close prospects (CP/ML/WB 6/30). 4. Launch a planned giving program so that at least six individuals include the organization in their plans or make an outright gift with a similar intent (WB 6/30). a. Develop possible alternatives, including best practices from other organizations (WB 8/30). b. Decide best alternatives, including determining what could go wrong (WB 9/30). c. Draft an implementation plan, including specific completion dates and people responsible (WB 10/30). d. Close six gifts (WB/ML 6/30).

Chapter = c10

132

Date: Dec 8, 2010

Time: 9:28 am

Operations

A word of caution: goal setting can be dicey when the environment is unsteady and time is at a premium. In such conditions, people actually care less about participation and more about being told what to do. That said, when there is time to set goals with those who will be accountable for achieving them, take the time. No matter what, setting goals is always better than not setting them without regard to degree of participation: “Even when it is necessary to assign goals without the participation of the employees who must implement them, research suggests that more focused efforts and better performance will result than if no goals were set.”13

Chapter = c11

Date: Dec 8, 2010

Time: 9:35 am

CHAPTER

11

Budget You spend as little as you can, you earn as much as you can. —Colin Blumenau1

here is great variety in the formats used for the budget, and there is no universal rule except one: a budget should not be longer than one or two pages at the most. Frequently, the current budget format is a holdover from an executive director long since departed and needs revision to reflect the needs of the current readers. Be forewarned, however, that asking too many people for their opinions could create a format that is too complicated; what should have been a simple three- or four-column presentation turns into something impossibly confusing. As a minimum rule of thumb, any budget summary presented to the board should give enough information to answer these four questions:

T

1. 2. 3. 4.

What What What What

has been spent so far this fiscal year? is the approved budget for the current fiscal year? is the projection for how the current fiscal year will end? is the difference between budget and projection?

By having these four perspectives, the reader can understand the basic financial position. Of particular importance is the often-neglected forecast. The late General Dillman Rash, a wizened community volunteer and soughtafter board member in Louisville, Kentucky, used to call the surplus or deficit the “southeast corner of the budget,” referring to the lower-right corner of the financial statement where he said, “The sun goes up or down on the executive director.” It was, he said, “about the only number that any board member worth his or her salt should care about.” Regrettably, the most common format revolves around year-to-date comparisons complete with percentages and extensive detail. This approach 133

Chapter = c11

Date: Dec 8, 2010

Time: 9:35 am

134

Operations

TABLE 11.1 Common Budget Format

Total Revenue Total Expenses Revenue less Expenses

Last Year Yr to Date 5/31

Budget Yr to Date 5/31

$ Difference Column 1 less Column 2

This Year Yr to Date 5/31

% Difference Column 4 ÷ Column 2

224,531 200,490

285,787 248,909

60,746 48,419

284,082 316,510

(0.6) 127

24,041

36,878

12,327

(32,428)

(88)

has arisen primarily because publicly held corporations use quarter-toquarter comparisons and for-profit oriented board members are comfortable with this. It could also be that the software in use defaults to this format. In a nonprofit, however, such information can be largely distracting. Table 11.1 is an example. We know very little about what is going on in this organization beyond year-to-date comparisons. More importantly, the reader cannot get a clear picture of the anticipated surplus or deficit that will occur at the end of the fiscal year. Table 11.2 shows the earned income section of a typical nonprofit that shows the four-column format in action. If the budget being presented includes a proposed budget for the coming fiscal year, you simply add an extra column to the right of the forecast TABLE 11.2 Better Budget Format

(in Thousands)

Actual Yr to Date 6/30

Budget for Yr Ending 12/30

Forecast for Yr Ending 6/30

Difference Column 3 less Column 2

Revenue Contributed Earned

696 805

1,891 1,113

2,420 947

529 (166)

1,501

3,005

3,367

362

1,221 160 224

1,462 200 217

1,265 141 514

(197) (59) 297

1,605

1,879

1,920

41

1,126

1,447

321

Revenue Expenses Program Services Management and General Fund-raising Expenses Revenue less Expenses

(104)

Chapter = c11

Date: Dec 8, 2010

Time: 9:35 am

135

Budget

TABLE 11.3 Abbreviated 990-Based Budget Format Difference Column 3 less Column 2

Budget for Yr Ending 12/30

Forecast for Yr Ending 6/30

696 805

1,891 1,113

2,420 947

529 (166)

1,501

3,005

3,367

362

1,221 160 224

1,462 200 217

1,265 141 514

(197) (59)

1,605

1,879

1,920

41

(104)

1,126

1,447

321

3,786

5,184

6,850

1,666

225

221

351

130

3,396 165

3,698 1,265

3,748 2,624 128

50 1,359 128

Net Assets

3,560

4,963

6,499

1,536

Liabilities and Net Assets

3,786

5,184

6,850

1,666

Actual Yr to Date 6/30

(in Thousands) Profit and Loss Revenue Contributed Earned Revenue Expenses Program Services Management and General Fund-raising Expenses Revenue less Expenses Balance Sheet Assets Liabilities Net Assets Unrestricted Temporarily restricted Permanently restricted

column and then the difference column will compare the forecast to the budget for the coming fiscal year. Generally, the more information that is added and provides value to the reader, the better, but there is always a limit. Where that limit occurs is going to be different for every organization, but there is a limit. There is peril in providing too much information because people may not be able to wade through the details. The best place to begin a discussion of the right format is at the absolute minimum, not the maximum. The four-column approach (year to date, budget, forecast, and variance) is generally all that is required. Some organizations like to add a balance sheet to the financial presentation and there is no objection to doing so. Indeed, this can be very helpful. Even so, it is good to remember that balance sheets are complex

Chapter = c11

136

Date: Dec 8, 2010

Time: 9:35 am

Operations

and often difficult to understand. Keeping things simple is always a good idea and reducing the balance sheet down to its basic elements accomplishes this. Typically, the abbreviated balance sheet is shown at the bottom of the budget. It is also good to remember that producing balance sheets regularly throughout the fiscal year can be a time-consuming activity that may deliver limited benefit especially for smaller organizations. As implied earlier in the success measures section, one of the easiest ways to build a budget is to use the categories from the IRS Form 990. It allows you to compare your organization to your peers easily and serves as a credible platform for communicating your financial position. Take, for example, an economic development agency shown in Table 11.3. At less than one page, it is perfectly adequate for use at the full board level and generates a comprehensive view including the balance sheet. Because agencies that are required to file the Form 990 will have a methodology already in place for dealing with this, the budget format already exists. In short, it is convenient and readily available for most. Do not let the brevity of this chapter understate the importance of the financials in general and the budget in particular. It bears repeating that about two-thirds of the nonprofits in a study on innovation were unable to move their ideas forward because of lack of funding, growth capital availability, narrowness of government funding streams, and foundations that encourage innovation but don’t sustain it.2 Neglect the budget at your peril.

Chapter = c01

Date: Dec 13, 2010

Time: 11:40 am

PART

V

Governance When it comes to governance, everyone is an expert. —John C. Whitehead1

STRATEGIC PLAN Where to go tomorrow? Lines of Business Success Measures Vision

OPERATING PLAN What gets done today? Goals Budget

PURPOSE Why? Delegation Who does what? Duties Guidelines

Accountability When did it happen? Agendas Assessments

GOVERNANCE PLAN

S

omewhere there are effective governing boards. With more than a million and a half tax-exempt organizations in operation today, the odds have to be favorable. Unfortunately, as many board members and executive directors know, good governance is tough to achieve. It’s a bit like newborns who sleep through the night: You’ve heard about them, but it certainly didn’t happen with your kids. A study on executive director tenure and experience, for example, ranked board relations as one of the top three reasons why executive directors would leave their jobs behind burnout and career opportunity.2 That governance can cause heartburn is hardly breaking news. In the mid-1990s, noted governance experts Barbara Taylor, Richard Chait, and Thomas Holland wrote, “Effective governance by a board of trustees is 137

Chapter = c01

138

Date: Dec 13, 2010

Time: 11:40 am

Governance

a relatively rare and unnatural act.”3 They hadn’t changed their minds nearly a decade later when they stated, “There is no question that the nonprofit sector has a board problem. Frustration with boards is so chronic and widespread that board and troubled board have become almost interchangeable.”4 John Carver, another governance authority, said much the same in 1997, “With good evidence, many people believe that boards will always stumble from rubber-stamping to meddling and back again. They believe the realities of group decision making forever destine boards to be incompetent groups of competent people.”5 And when his new edition was released a few years ago, not a word of this statement had changed.6 It is not always true that a poorly functioning board can severely damage an institution or that an effective board equals an effective organization; there are exceptions to every rule. However, despite the lack of definitive research on the causal relationship between boards and effective organizations, common sense says that a better board can help the organization reach its full potential; a dysfunctional board can hold it back. There are other reasons to care about the quality of governance. Some board members point with good reason to the advantage of teams over individuals in decision making. William Bowen, president emeritus of The Andrew W. Mellon Foundation, argues that the “exercise of collective responsibility through a board can slow down some kinds of decision making, but it can also dampen the enthusiasm of the aspiring autocrat. It provides checks and balances by adding layers of judgment and protections.”7 Even if the full board is disinterested in attending to its responsibilities, the individual board member’s self-interest about personal liability should offer ample motivation. But because directorships are bestowed upon the generous patron as a thank-you for unselfish giving, this fact is often overlooked. Trusteeship should not be considered a gift, but rather should be conveyed as a serious obligation that carries significant responsibility and accountability. And what is the best way to avoid difficulties? Say experts Jacqueline Covey Leifer and Michael Glomb, “Clearly, the best way for board members to avoid personal liability is by fulfilling all of the obligations of the office.”8 Of course, this can be somewhat problematic if the board members don’t know what those obligations are in the first place. Just how well are board members and the boards they serve fulfilling the obligations of the office? A finding from the most recent Governance Index published by BoardSource is discouraging, “According to chief executives and board members themselves, nonprofit board performance is mediocre at best.”9 How do we end up with this sobering news from an organization that has been building effective boards since 1988 and from a survey of

Chapter = c01

Date: Dec 13, 2010

Governance

Time: 11:40 am

139

more than 2,150 chief executives and board members who were selected from its own membership? Understanding what’s wrong with the board begins with the common complaints. The late Peter Drucker says that there are just two: “Nonprofit CEO’s complain that their board ‘meddles.’ The directors, in turn, complain that management ‘usurps’ the board’s function.”10 Barbara Taylor, Richard Chait, and Thomas Holland list four key complaints: 1. “There’s no red meat on the table.” The issues before the board and its committees are little more than a mishmash of miscellany; trivial matters disconnected from one another and from corporate strategy. 2. “Board meetings are boring.” Events are tightly scripted, outcomes are largely predetermined, and opportunities to substantially influence significant decisions are severely limited. 3. “We have plenty of information, but we have no idea what it all means.” Board packets bulge with raw, uninterpreted data, and trustees suffer from a deluge, not a dearth, of information. 4. “The parts on this board sum to less than the whole.” The trustees’ individual talents are not harnessed to a collective effort. The board functions more like foursomes on the same golf course than like players on the same team. Each committee or clique engages in a self-contained event on a common terrain, largely oblivious to the activities of others.11 After reading this, how can anyone be surprised that many board members “find serving on boards to be an exercise in irrelevance”?12 But so what? Should leaders at nonprofits care that meetings are boring or that there is no red meat on the table? It comes with the job after all. That’s certainly the opinion of William Bowen: “Directors are like airline pilots, in that their lives consist of hours of boredom punctuated by moments of terror.”13 So long as we arrive safely, do we really care what the pilot does at 30,000 feet with the autopilot engaged? Never mind that pilots sometimes overshoot the airport; it’s the take-offs and landings where we want the pilot frosty. Unfortunately, the viewpoint that board members are like pilots is a bit off the mark. In the conventional thinking about governance, the board decides what and staff decides how. So the board would decide the destination and the executive director would figure out how to get there. As such, it’s usually the executive director who’s in the pilot seat although some board chairs usurp that position. If the board isn’t the pilot, then what is it? Part air-traffic controller, airline owner, and passenger is the schizophrenic truth; part “Ascend to 10,000 feet” and part “Dear Lord, don’t let me crash.” Don’t think for a moment that the

Chapter = c01

140

Date: Dec 13, 2010

Time: 11:40 am

Governance

executive gets off easily. We all know that a flight can get into real trouble when the pilot leaves the flight deck, but boards ask for this all the time. The board wants the executive director to be the pilot and flight attendant at the same time. Some executive directors like this state of affairs because it gets them off the hook. After all, says the late Kenneth Dayton, former CEO of Dayton Hudson, “A weak CEO can often protect his or her hide by delegating management’s responsibilities to the board.”14 Upward delegating so muddies accountability that no one is quite sure who is responsible for what. And that’s especially true when it comes to fund raising. What executive director hasn’t complained about ineffectiveness on the part of the board in fund raising without taking any responsibility for the failure? “That’s the board’s job,” says the executive director, “Not mine.” Little wonder that executives and their board members give fund raising their lowest grades on the board performance report card.15 Many of these complaints about governance are simply unavoidable. Reviewing financial audits, for example, is not the most interesting task for board members, but it is a crucial one. If the organization is performing as it should, perhaps some boredom is tolerable and may be a welcome sign of an effective board. No one could reasonably suggest that the executive director of a successful agency manufacture a “crisis du jour” for the board simply to keep the members entertained and stimulated. And yet many a committee has been created for reasons just like these. Attending to these complaints has merit, however. Being awash in meaningless information is a waste of time and resources. And if every meeting is a sleeper, what is the point of meeting at all? Boards can certainly make a difference in the life of the organization. That difference can be positive. For example, we know that boards “have an impact on executive tenure and satisfaction and on agency success. Longertenured executive directors and those leading larger agencies perceive their boards to be more supportive and helpful than executives projecting shorter tenures for themselves or heading smaller agencies.”16 And that difference can be negative in that a “series of successive, short-tenure executives can do lingering harm to an agency’s culture and performance.”17 Though we know that “nonprofit organizational effectiveness is strongly related to board effectiveness,”18 we also know that “many boards do not fully meet their governance and management responsibilities.”19 Indeed, as William Bowen observes, “Boards can also matter greatly as negative forces when they act imprudently.”20 The simple truth is that most people want nonprofit boards to be effective and accountable, but we have always struggled with knowing how best to pull this off. All board members want meetings to be “give and take” and

Chapter = c01

Date: Dec 13, 2010

Governance

Time: 11:40 am

141

accomplish important work, but most are “show-and-tell” events awash in reports or “shake ‘n’ bakes” where any subject is game and the board forages about for things to do. It is not that nonprofit boards don’t want to govern well; they just don’t necessarily know how to go about it. The governance plan starts the journey to governing well.

Seven Realities That boards want to be great but cannot make it happen is largely due to the seven realities of governance. First is that part-time board members have limited time to give. With the average number of meetings each year at 6.9 and length at roughly 3.3 hours, the average nonprofit board will spend about 16.5 hours a year around the table.21 The average board member, however, will not make all of the meetings, as evidenced by the average attendance rate of 71 percent.22 Do the math, and the average board member spends about 11.5 hours a year at board meetings. And you thought you’d move mountains how? This scarcity of time leads to the second reality of imperfect knowledge, which in turn affects the quality of decision making. That a board made up of part-time novices should have the final responsibility for the organization managed by a seasoned professional who likely works 2,500 to 3,000 hours a year creates a paradox of nonprofit governance. Melissa Middleton describes this paradox as “strange loops and tangled hierarchies,”23 and this portrayal is as fresh today as when it was written nearly 25 years ago: ■

■

The board hires, fires, and supervises the executive; thus the executive is a subordinate of the board. The board is responsible for making final policy decisions and should not become “a captive of the palace guards.” However:

■

■

The executive often has the important information and thus serves as an educator of the board. As implementers of policy, executives may in fact be the functional authority.24

Third, in the world of nonprofit governance, size does matter. At an average size of 16,25 the board is larger than the task of governance requires. It’s no wonder that board members don’t necessarily feel that they count because they often don’t. After all, it is common sense that larger boards have

Chapter = c01

142

Date: Dec 13, 2010

Time: 11:40 am

Governance

more difficulties working tougher and accomplishing objectives than small ones. This is especially true if you subscribe to the size-of-ten rule from Jon Katzenbach and Douglas Smith, “Ten people are far more likely than fifty to successfully work through their individual, functional, and hierarchical differences toward a common plan and hold themselves accountable for the results.”26 Fourth, the composition of the board is haphazard at best and generally has little to do with the task of governance. Sure, people will say the board’s primary recruiting tool is the “Three Ts” (time, talent, and treasure) or the “Three Ws” (wealth, wisdom, and work). But it’s really affluence or influence that is best known as the rule of “Three Gs” (give, get, or get off). While perhaps good for fundraising, it does not necessarily support effective governance, and certainly works against building the board team. Rich corporate executives serve alongside the volunteer influencers who don’t have two dimes to rub together. Board members who understand the intricacies of financial audits at billion-dollar firms sit across the table from the people that can’t balance their home checkbook. If you want evidence for the affluence or influence approach, just look at the 71 percent attendance rate. There is great emphasis on what you bring to the table, but very few consequences for actually being at that table.27 So what if a meeting is missed? Federal and state laws have arisen that make it extremely unlikely that a board member will ever be held accountable for not showing up. Are there any employees who could produce meaningful results if they missed almost 3 out of 10 major meetings, as do board members? Not only are there few consequences for poorly performing board members, but the same holds true for poorly performing boards. Whose picture ends up on the front page of the morning paper after organizational meltdown? Usually not the board chair. Many people still remember William Aramony, who did seven years in prison for his role in a scandal at the United Way of America in the early 1990s, but who remembers the board chair at the time? (It was the late Edward A. Brennan, then the chairman of Sears.) Most board members not only thankfully miss out on the public floggings of nonprofits that sometimes occur, but they usually miss out on the accolades as well. Is it bad that board members are chosen for reasons other than their skill at governing or that there aren’t consequences for good or bad behavior? Of course not. “Board members,” says one board chair, “are one-quarter governance, three-quarters influence.” A board member with the ability to raise significant funds or influence a particular outcome is worth his or her weight in gold. Ask most United Ways if they’d trade their 45-member campaign-driven boards for smaller, more effective governing boards and

Chapter = c01

Date: Dec 13, 2010

Governance

Time: 11:40 am

143

most would say, “No,” especially those that have done just that and seen their campaign results sink. The fifth reality is fund ability. Fundraising is problemo numero uno for boards and executive directors, and—guess what—there’s good reason.28 According to a BoardSource survey, when it comes to raising money, 73 percent of board members are comfortable with writing or signing letters, 63 percent with providing contacts, 54 percent with meeting prospects in person, 43 percent with making phone calls, and 40 percent making the ask straight on.29 And despite the common understanding that funders frown on anything less than 100 percent board giving, less than half of executive directors report meeting this standard.30 Many executive directors will jaw drop at the idea that 40 percent of board members are comfortable with making “the ask” because their personal experience suggests it’s much, much lower. Laura Fredricks opens her book on fundraising, The Ask, by saying, “Some people would rather stand in the longest supermarket line than ask for money,”31 but maybe she should change that to “most people” based on the BoardSource survey. Sixth, pulling the board together so that there is continuity from meeting to meeting is tough since the average attendance of board members guarantees a different board at every meeting.32 It’s “d´ej`a vu all over again” as precious time at meetings is taken up answering the question, “When did we do that?” With time and talent in short supply, the board lucky enough to attract a top-quality board member will likely share that person with other boards. Because most boards have term limits that most commonly restrict service to six consecutive years, new members arrive just as seasoned ones rotate off.33 A board with two consecutive three-year terms for board members will lose 15 percent of its seasoned members every year and welcome the same number of newbies to the board. Put another way, term limits ensure that the number of newcomers to seasoned veterans is one to one, with almost half of all board members in their first, second, or third year of board service.34 Making matters worse is that the average tenure of the officers is less than two years.35 If we asked a championship sports team to win by retiring nearly 15 percent of the best players at the end of every season, we’d be barred from the stadium. Yet this is exactly the way that it’s done on the nonprofit board. Adding to the constant flux are board chairs who spend two years or less at the helm. Imagine that same championship team losing its coach every other year? Is it any wonder that the board’s voice is inconsistent from meeting to meeting? Here’s what can go wrong: Simple majority carries the vote for most nonprofits and quorum is also generally set at simple majority. Considering 7 out of 10 board members on average are absent means that just four

Chapter = c01

144

Date: Dec 13, 2010

Time: 11:40 am

Governance

people can change the direction of the organization. You get the point. And considering that only 2 in 10 board members has a 90 percent or better attendance record,36 you can pretty much bet that most of those decision makers aren’t completely up to speed on the work of the organization. The seventh reality is executive director inexperience. The one constant in the governance equation—the executive director—is a first-timer in the job with five or less years of experience.37 These are “once is enough” leaders; five out of six take an immediate vacation after leaving, and only one out of three ever goes on to take another top job with a nonprofit.38 It’s the blind leading the blind in many nonprofits. Helping to explain this “get me out of here” situation is that four out of five nonprofits have budgets of less than $1 million,39 nearly 30 percent have one or no full-time employees, half have five or fewer, and almost 90 percent have 50 or fewer.40 This means that almost all nonprofits are small businesses where money is generally tight, executive salaries low, and tensions high in an increasingly competitive job market at the top that Thomas Tierney calls the leadership deficit.41 What does this add up to? Put simply, “many nonprofit leaders are ‘learning by doing.’”42 Small organizations are magnets for novice executives who inherit the problems of the previous novice executives; novices beget novices. The downside to getting top-level jobs early in a career is that you don’t get those “learning by watching first” opportunities that those in the forprofit sector receive. One day you wake up to find yourself in an executive director’s job having never been to a board meeting or done a marketing plan or led anyone anywhere. In the for-profit sector, the care and feeding of executive talent is taken quite seriously. A young leader would never be given an assignment without having the skills to get it done. Attitude is important, of course, but so, too, is having the ability to get the job done: “Many nonprofits reflect the interests of individuals who are idealistic, committed to a set of nonmonetary goals and generally less experienced in some kinds of practical work than are those who live principally in the business world.”43 To be sure, there’s a big upside to working in nonprofits. First, “in any economy, the best jobs provide emotional as well as financial rewards.”44 This statement reflects what workers in the nonprofit sector already know: Almost all who work in the sector experience a high level of enjoyment in their work.45 Second, you can land a top job young. It might not be a big nonprofit, but it’s a company nonetheless. Three years after graduating with my MBA and before I was 30, I had the job. My friends who graduated with me were still buried in the depths of their for-profit companies at the same point in their careers. The bountiful number of opportunities for young leaders is perhaps explained best by the fact that so many of the agencies

Chapter = c01

Date: Dec 13, 2010

Governance

Time: 11:40 am

145

are small; 45 percent operate on expense budgets of less than $100,000.46 It’s a wonderful learn-by-doing opportunity to get a top job so early in a career. The downside for the organization is that it’s a learn-by-doing opportunity. In sum, part-time board members have limited time to share at the board table, which leads to imperfect knowledge of the organization. The size of the board is a drag on team effectiveness, but this is largely irrelevant because the composition of the crew is based on each member’s affluence or influence. Hoping that this will somehow lead to a fundraising powerhouse board is misplaced, as fund ability is in short supply even though it’s priority one for the executive director. Difficulties with maintaining continuity from meeting to meeting and year to year guarantees an ever-changing board. Executive director inexperience only makes matters worse. Not all nonprofits experience the seven realities at the same time, but it is a rare one that doesn’t encounter a handful simultaneously. Frustrating as these seven realities may be, understanding and accepting them is a better approach than expending precious energy and time trying to change them. Effective leadership understands these realities and works with them; ineffective leadership is either oblivious to them, fights them to the point of distraction, or spends its time finding fault for its performance. For such agencies, being irrelevant would be a step forward. These realities of nonprofit governance have a causal impact on many other aspects of governance and organizational life. Cohesion, the team spirit of the board, is affected by size, composition, and continuity. Fundraising results are highly sensitive to size and composition. The seven realities of nonprofit governance would at first seem fixable. Upon examination, however, many of them are simply unaffected by any attempt to impact them. For example, time is fixed; no amount of effort can make more of it. It can be used more effectively, but it can’t be increased simply through wishing for more. It is possible to make a larger board smaller, but not without the trade-offs including the loss of influential “door-opening” board members. The problem with denying these realities, with not responding to them, is that the board will forever be reactive in texture, always dependent on outside stimuli in the form of rushed, stopgap measures or trendy fixes. This year, it’s strategic restructuring; next year, it’s outcomes management; last year, it was the Better Business Bureau’s process to credential organizations; this year, it’s the standards of excellence. Maybe we can make it all better if we have a smaller board or a bigger board, maybe more time for meetings or perhaps a shorter time requirement, more thorough advance materials or abbreviated information, meetings after work or breakfast meetings, an annual retreat off site, or no more retreats at all. Here’s a good example of this problem-fixing approach to governance. In just one short readable article, “United We Stand: How to Make Your

Chapter = c01

146

Date: Dec 13, 2010

Time: 11:40 am

Governance

Board Work Like a Championship Team,” we are advised first to turn meetings into team events by using consent agendas, making board development a part of every meeting, going into executive session, and scheduling themed meetings. Inclusion should be the rule in board structure, which can be achieved by working toward a smaller, simpler board and downplaying the role of the executive committee. Self-assessment should be an ongoing part of the board’s work. Recruitment, orientation, and mentoring are keys to better governance. In the final few paragraphs, we are advised that “building a high-performing board team means building a team that is ready, willing, and able to focus on the main thing.”47 No board should be without this sort of helpful advice, provided, of course, that everyone knows what the organization is supposed to be doing in the first place, that everyone knows the “main thing.” That’s often where boards and organizations get into a lot of trouble. They forget that the fundamental purpose of governance is to achieve the chosen destiny for the organization; the board is a means to an end and not an end unto itself. If the board fails to deliver on the promise of achieving its mission, it doesn’t matter if board meetings are stimulating or directors happy. The effective board knows that it cannot escape its accountability and authority; it uses its precious time and knowledge in ways that count. No board has the time or knowledge to watch over the shoulder of the professional staff every minute; the effective board decides what is important to monitor, communicates it precisely, stands aside to let the work get done, and follows up to see that it happened. This way, the professional full-time staff knows what is expected. Whereas the ordinary board forages about for things to watch over and often dummies down to micromanaging line items in the budget, the effective board, board member, and chief executive make time count. Boards often overlook the obvious: the board of directors is a team. When it comes to teams, the biggest source of difficulty isn’t with how long or short a meeting is or how big or small the size of the collective is. It lies with the fundamental purpose. Carl Larson and Frank LaFasto explain: In the descriptions of ineffectively functioning teams the factor that occurred far more frequently than any other was very simple: The team had raised—or had allowed to become raised—some other issue or focus about the team’s performance objective. Something was being attended to that had assumed, at least at that time, a higher priority than the team’s goal. . . .Whenever we encounter a team that is functioning poorly we always ask first: What is it that this team is elevating above its performance objective? 48

Chapter = c01

Date: Dec 13, 2010

Governance

Time: 11:40 am

147

But what if there is no performance objective? The answer comes from Parmenides, a fifth-century Greek philosopher, who proposed the answer, which is that nature abhors a vacuum. This means that there is no such thing as empty space because nature always fills it with something. These days, the concept has been broadened to include the human psyche, or as Psychology Today’s Leon Seltzer puts it, “Human nature abhors a vacuum.”49 In other words, if there are no performance objectives, we’ll make them up. And that includes clear duties and guidelines. Ever wonder why boards go foraging in the pastures of micromanagement, why executive directors usurp and boards meddle? Now you know. Human nature abhors a vacuum. Enter the governance plan!

Chapter = c01

Date: Dec 13, 2010

Time: 11:40 am

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

CHAPTER

12

Delegation Same bed, different dreams. —Chinese Proverb

here’s a wonderful scene in Jerry Maguire where he tries to convince Rod Tidwell—his one and only client—to get with the program. What Rod has wanted from day one is for Jerry to “show me the money” that Rod so self-righteously says he deserves, the “love, respect, community, and the dollars too, the entire package, the Kwan.” Talented as he may be, Rod has gained a well-deserved reputation as a high-maintenance diva. In order to get the Kwan, Rod needs to up his game, which Jerry does his best to describe, “Here’s what I am saying. This is a renegotiation. We want more from them so let’s give them more. Let’s show them the pure joy of the game. Let’s bury the Attitude a little bit, let’s show them.”1 The response from Rod is explosive, “Do your job, man. Don’t you tell me to dance. I am an athlete, not an entertainer. These are the ABCs of me. I don’t dance. And I don’t start pre-season without a contract.”2 Jerry’s response is a plea for help, “You don’t know what it’s like to be me out here for you. It is an up-at-dawn pride-swallowing siege that I will never fully tell you about! Okay?! Help me, help me help you, help me help you.”3 This scene, as entertaining as it is, illustrates the confusion that occurs each and every day between executive directors and their boards. Whose job is it to deliver the Kwan? Is it the executive director’s, the board’s, the board member’s, all of them, some of them? Which one of these characters—Jerry or Rod—represents the executive director? Is Jerry the executive director who begs the board to “help me help you” or is he the high-handed “do your job” character of Rod? Most people take the normative view that the board plays the role of Rod “do your job” Tidwell and the executive director plays Jerry “help me

T

149

Chapter = c12

Date: Dec 13, 2010

150

Time: 12:2 pm

Governance

help you” Maguire. In other words, the board is the boss; the executive director is the worker. But at the best-run organizations, the answer is quite the opposite.4 The best executive directors understand that it is their central responsibility to help the board help them, not the other way around.

Levers Many boards and professional staff operate under the long-held assumption that boards decide, staff implement. The idea that boards make policy and staff members implement it is as old as the sector itself. Boards decide what, and staff decides how. Boards set policy and staff execute it. Cyril Houle observes this pattern in his Governing Boards: Many authorities on boards have enunciated a single, fundamental rule by which to define the function of the board as contrasted to the function of the executive. Most frequently they say, often with an air of profundity, that the board should determine policy and the executive should carry it out. Brian O’Connell [co-founder of Independent Sector] has responded succinctly “This is just not so” and has called that distinction “the worst illusion ever perpetrated in the nonprofit field.” 5 At the same time that he rails against this single fundamental rule, Cyril Houle offers his own replacement: “Whenever the board can, it should stay at the level of generality and not specificity. . . . The executive, on the other hand, must recognize that hers is the immediate responsibility.”6 Thus, the board is big picture; the executive director is here and now. This causes an inevitable puzzle: How can the board stay at the level of generality that respects the chain of command so essential to accountability, but still accomplish its fiduciary requirements?

Puzzles Board members in all fairness have a difficult job to do. They are expected to be members of a collective, individual board members, and volunteers, each with different expectations. Robert Andringa and Ted Engstrom highlight this puzzle using the metaphor of hats to describe their roles: 1. Governance hat. Worn only when the full board meets, proper notice has been given, and a quorum is present. . . . An individual board member has no authority in governance. Governance is group action. 2. Implementation hat. Worn only when the board gives one or more board members authority to implement a board policy. . . . Such

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

Delegation

151

authority is not automatic just because a person is a board member. It depends on the board’s having given its authority, acting by resolution in an official meeting. 3. Volunteer hat. Worn at all other times, when board members are involved with organizational activities as volunteers. . . . As a volunteer, a board member has no individual authority simply by virtue of his or her position. When wearing a volunteer hat, the board member is accountable to another person.7 The authors go on to note that “problems arise when board members and/or staff confuse these hats or when board members assume that individual and collective board responsibilities are interchangeable.”8 Little wonder given that the fourth hat—the board member hat—is missing from the list. Yes, the board member is sometimes granted authority to do a specific job, but in the meantime he or she is hardly a volunteer. This would be akin to saying that a duly elected public official becomes a common citizen when he or she leaves work at the end of the day. Can the boss really be your subordinate when he or she has the power to terminate your employment? The problem with being a board member in chambers or when under specific board authorization, but a volunteer at all other times usually begins to appear in complaints about parking-lot chatter or disrespect of confidentiality. Once elected and until the term of service is complete, the board member is never a volunteer. Wearing the volunteer hat may be a nice way to say that you have to roll up your sleeves and pitch in, but the board member must never forget that he or she is never a volunteer, but is always a board member, always. As implied, one of the fundamental reasons that governance is often so confusing is because of the frequent mashing together of board and board member responsibilities. The job of the board member is very different than that of the board, but you might not know that when reading some of the literature. For example, the report card for board performance from BoardSource’s 2007 Governance Index lists the following 13 items:9 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Understanding organization’s mission Financial oversight Legal and ethical oversight Knowledge of organization’s programs Providing guidance and support to CEO Level of commitment and involvement Evaluating the CEO Strategic planning Monitoring organizational performance Understanding board’s roles and responsibilities

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

152

Governance

11. Recruiting and orienting new board members 12. Community relations and outreach 13. Fund raising Most of these are the province of the board, but some pertain solely to board members. Boards don’t have knowledge of the organization’s programs, board members do; boards don’t have a level of commitment and involvement, board members do. The botttom line is that board duties are very different than those of board members. Perhaps the biggest problem that occurs with combining board and board member duties—and calling board members volunteers when they’re out of the board room—is the “who’s the boss” dilemma. As described by Alexis de Tocqueville so eloquently some 150 years ago, “When the government speaks it is difficult to ascertain the difference between a suggestion and a command.”10 A prominent board member, influential in the community and generous to the organization, pulls the executive director aside to ask a question about what insurance broker the company uses and why. The executive director should certainly be able to answer these questions, but if the questioning were to continue, the executive director might begin to wonder whether the board member is giving direction. Perhaps the organization is not using the best broker; perhaps the board member wants a more thorough process. Advice becomes instruction. “But I was wearing the volunteer hat at the time” is hardly palliative to the executive director whose feet are being held to the fire for the consequences of switching to an inferior insurance provider. Board members very rarely have a problem with confusing advice with instruction; it is the staff members who have the difficulty. “I work for the board, this is a board member, therefore I work for this board member” is the faulty logic, but it doesn’t go away simply because it is flawed. This can be an especially difficult problem when it’s the chair of the board. Board members have to be extremely guarded about how they interface with the staff, as Robert Andringa and Ted Engstrom warn: The most misunderstood and abused principle of governance is the requirement for group action. The chief executive and staff cannot serve two (or 22) masters. The full board sets policy, not individual board members who feel strongly about something and voice their opinions to the chief executive. Board members must be taught this principle, and staff must be reminded of it. Otherwise, confusion and conflict reign and board effectiveness is diminished.11 Regularly reminding board members of this principle is one way to deal with the problem. A better way is to explicitly clarify the duties of the

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

Delegation

153

board and the duties of the board members. And have different guidelines of conduct as well. And make sure that board committees only help the board with its duties and stay away from helping the staff with theirs unless asked by the staff. Despite these misgivings, the board has an interest in the operations of the organization. No board wants to get into the business of managing the organization, but no board wants to create a vacuum between itself and the day-to-day operations. Take, for example, an organization that announces the departure of two senior staff members in six weeks, one a nine-year veteran, the other a four-year veteran. Shouldn’t the board have an interest in this? An organization with short staff tenures is going to have difficulty accomplishing its goals and thus merits questions from the board including: How large is the senior staff team? What were the circumstances? Is this a continuing pattern? What sort of tenures do the other senior staff members have? The board has an obligation to ask tough questions about the organization, and the executive director has an obligation to answer them with “the truth, the whole truth, and nothing but the truth.” If the board must strike the right balance between asking and telling, then the executive has the same obligation. The process of asking tough questions should allow sensitive issues to be put on the table in a meaningful, respectful, and reasonable process as opposed to the random, knee-jerk manner that so often characterizes the process.

Keys It is no wonder that a good board is often a key criterion of nonprofit organizational high performance; it lands in the top two ways to improve the performance of leadership in Paul Light’s survey of opinion leaders and executive directors of high-performing nonprofits.12 No doubt, some of this is due in part to all the difficulties associated with governance; if you have a good board, it has to be a sign of high performance. But what are the key levers that improve governance, the low-hanging fruit, as it were? There is a great body of literature on teams that provides helpful advice. In many respects, the board is a team just like many other teams. It may have its own idiosyncrasies, true, but much about teams is applicable to the nonprofit board. Carl Larson and Frank LaFasto studied high-performing teams and found eight fundamental characteristics:13 1. 2. 3. 4.

A clear, elevating goal Results-driven structure Competent team members Unified commitment

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

154

5. 6. 7. 8.

Governance

Collaborative climate Standards of excellence External support and recognition Principled leadership

Using an instrument constructed around these eight characteristics, I set out to identify the key opportunities for improving governance. I surveyed nine nonprofit governing boards with a total of 169 members, including executive directors. In addition, I surveyed a total of 323 attendees at nonprofit capacity-building conferences. Keep in mind that the boards and attendees surveyed were interested in better governance, which likely makes them better than average. The results on a scale of 1 to 4, with 4 being best, are shown in Table 12.1.

TABLE 12.1 Board Performance Questionnaire Results Boards Attendees A Clear, Elevating Goal 1. We have a clear understanding of the mission and goals.

2.7

3.0

2. We view our mission and goals as important or worthwhile.

3.3

3.4

3.0

3.2

3. We have clear roles and accountabilities.

2.3

2.3

4. We have an effective communication system where credible information is easily accessible to all team members.

2.4

2.7

5. We have an effective communication system where opportunities exist for team members to raise issues not on the formal agenda.

2.5

2.8

6. We have an effective communication system to document issues raised and decisions made.

2.7

2.6

7. We monitor Individual performance and provide feedback.

1.8

2.1

8. We make decisions based on sound facts and interpreted without the harness of predisposition.

2.7

2.5

Average

2.4

2.5

Average A Results-Driven Structure

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

155

Delegation

Competent Team Members 9. We possess the relevant skills, abilities, and knowledge.

2.8

2.9

10. We possess a strong desire to make a meaningful difference to the cause.

3.2

3.2

11. We are capable of working well with each other.

3.1

3.1

3.0

3.1

12. We make serious individual investments of time and energy.

2.5

2.6

13. We do not pursue individual objectives at the expense of the cause.

3.0

3.1

Average

2.7

2.9

14. We have a climate of honesty—integrity, no lies, and no exaggerations.

3.2

3.2

15. We are open—a willingness to share, a receptivity to information, perceptions, ideas.

3.0

3.1

16. We are consistent—predictable behavior and responses.

2.8

2.9

17. We are respectful—treating people with dignity and fairness.

3.3

3.3

Average

3.1

3.1

18. Our standards of performance are clearly and concretely articulated.

2.2

2.4

19. Individual members require one another to conform to the established standards.

2.2

2.4

20. We exert pressure to make changes that constantly improve our standards.

2.2

2.4

2.2

2.4

Average Unified Commitment

A Collaborative Climate

Standards of Excellence

Average

(Continued)

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

156

Governance

TABLE 12.1 (Continued) Boards

Attendees

2.9

2.8

22. Our officers keep the vision of the future alive and in mind.

2.6

2.9

23. Our officers inspire us to make changes when needed.

2.5

2.7

24. Our officers unleash the energy and talents of the members.

2.3

2.4

25. Our officers suppress their individual egos on behalf of all of the members.

2.9

2.9

Average

2.6

2.7

Average

66.5

69.7

Median

66.0

70.0

55–78

57–83

External Support and Recognition 21. We celebrate our successes. Principled Leadership

68% of the scores fall in this range

By rank ordering the averages from the eight topics, you can see where boards are best and most in need of attention as shown in Table 12.2. To summarize, boards have the necessary clear, elevating goals and the competent team members, but the results-driven structure and the standards of excellence are lacking. Means testing showed statistical significance between the group of two at the top and the group of two at the TABLE 12.2 Board Performance Questionnaire Rankings

A collaborative climate A clear, elevating goal Competent team members Unified commitment External support and recognition Principled leadership A results-driven structure Standards of excellence

Boards

Attendees

3.1 3.0 3.0 3.0 2.9

3.2 3.1 3.1 2.9 2.8

2.6 2.4 2.2

2.7 2.5 2.4

A clear, elevating goal Competent team members A collaborative climate Unified commitment External support and recognition Principled leadership A results-driven structure Standards of excellence

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

Delegation

157

bottom. Thus, the key opportunities—the low-hanging fruit to immediately address—are results-driven structure and standards of excellence. Adding weight is a study conducted a few years ago with two groups of people attending a major national conference where governance was the central topic. The 72 attendees were from a wide variety of organizations; some were board members, some executive directors, and all were interested in the topic of the board team. The participants used the same questionnaire as above and ended up with an average score of 66. Following the quiz, each participant wrote down the three key obstacles to effective board performance. The participants then worked in small groups to prioritize the top three. These obstacles were then presented to the whole room and affinity grouped to reduce the volume of ideas. Finally, each participant voted on top choices on a one to three scale, with three being the top choice: Unclear roles (114) Lack of accountability (84) Inconsistent levels of individual commitment (55) Poor use of time, lack of time (40) Strategic direction (38) Poor communication (38) Personal agendas, ego (32) Ineffective leadership (16) Insufficient knowledge and training (11) Inactive or absentee board members (9) Poor interpersonal skills (8) Poor board member recruitment (2) The two top obstacles—unclear roles and lack of accountability— correspond with the survey categories of results-driven structure and standards of excellence. According to Carl Larson and Frank LaFasto, the critical element of a results-driven structure is clear roles and accountabilities: “In short, each member of any successful team must understand at the outset what he or she will be held accountable for and measured against in terms of performance. . . . Without clear roles and accountabilities, all efforts become random and haphazard.”14 In the delegation section of the governance plan, clear roles and accountabilities are addressed by the duties. The critical element of standards of excellence is clear and concrete standards, which are important because “the extent to which standards are clearly and concretely articulated determines the eventual likelihood of the

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

158

Governance

standards being met.”15 In the delegation section, standards are addressed by the guidelines. The job of a board member is tough enough to do even when duties and guidelines are clear, and even more difficult when operating within the seven realities of nonprofit boards. Under these circumstances, no wonder Karl Mathiasen complains that there is “a perplexing lack of clarity about what boards ‘ought to do.’”16 Boards are made up of people who surely will perform better, wear their different hats well, and be more satisfied in their service if they know what is expected of them, including not only duties, but guidelines of conduct as well. As Sharon Percy Rockefeller says: Boards have to know their role. They have to care a lot, and they have to be committed to the organization. For both the board and staff, the dynamics of that caring can be time-consuming, but worth it in the long run.17

Duties In the five essential questions, duties and guidelines answer the fourth question: Why? Where to go tomorrow? What gets done today? Who does what? When did it happen? Duties are jobs, nothing more, nothing less. If left vague, many board members will likely confuse the duties of the board with those of the individual board member and the executive director may have mistaken impressions of his or her authority. The duties in the delegation section solve this problem by providing detailed job descriptions for the full board, committees, officers, individual board members, and the executive director. Duties will vary from agency to agency, but are assigned only if they carry both full responsibility and authority. Thus, only those duties to which the board intends to hold itself accountable should belong to the board. Like other Results Now elements, the answers will depend on the particular needs and circumstances of the organization at its time and place. There is no right or wrong answer. While answers are indeed unique to each organization, common themes have emerged especially with regard to the

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

159

Delegation

duties of the board, including the full board itself, committees, and officers, and the executive director.

Board Duties When is a board a board? In a general sense, it is when the board members are convened around the table with a quorum present. Some might argue for a more specific definition that it is when the question is called on a motion. Others might say it is when the board is engaged in its duties. The board of the organization includes three elements: the board itself, the committees, and the officers.

BOARD Most boards will generate at least four major duties, as did an agency supporting families of hospitalized children as shown in Table 12.3. There are boards that will add other duties to the list including fund raising or advocacy. Provided that the board holds itself accountable for the results and uses its authority to get the job done, this presents no problem. Accountability and authority should be inseparable, which can be helpful in deciding to whom the duties should be delegated. For example, if the board intends to hold itself accountable for the duty of fund raising, it should exclude it from the executive director’s roster of duties. But if, at the same time, the board intends to hold the executive director accountable for the

TABLE 12.3 Board Duties Duties

Results

– Evaluate/change mission – Ask good questions, direction, serve the community, establish policies, growth, ascertain community needs and how to meet them, resolve growth questions, test assumptions, future planning, detective work – Hire/fire CEO, delegate, oversee the executive director, governance, time contribution, obtain information/knowledge/learn, education, hold each other accountable, job of the board, serve each other, recruit, bylaws update – Oversee money, operations, financial responsibilities, budget, avoid mission creep, stay on mission

1. Decide why 2. Decide where to go tomorrow

3. Delegate who does what a. Board (board, committees, officers) b. Board members c. Executive director 4. Determine when it happened

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

160

Governance

TABLE 12.4 BoardSource and Results Now BoardSource

Results Now

1. Determine the organization’s mission and purpose 11. Determine the organization’s programs and services

1. Decide why 2. Decide where to go tomorrow 3. Delegate who does what

2. Select the chief executive 8. Recruit and orient new board members 10. Enhance the organization’s public standing 13. Strengthen the organization’s programs and services 14. Support the chief executive 3. Provide proper financial oversight 4. Ensure adequate resources 5. Ensure legal and ethical integrity 6. Maintain accountability 7. Ensure effective organizational planning 9. Assess board performance 12. Monitor the organization’s programs and services 15. Assess the chief executive

4. Determine when it happened

bottom line, including fund-raising results, the authority for fund raising is the executive director’s. Testing the four Results Now board duties against the responsibilities of nonprofit governance provided by BoardSource lends support to their validity, as shown in Table 12.4.18 The bottom line is all boards want to make a difference for their organizations. They want to avoid wasting time and talent. The common complaint of not doing important work is often a result of simply not taking time to describe exactly what that important work should be.

COMMITTEES Many a one-liner has been written about committees, including Anthony Sampson’s “Muddle is the extra unknown personality in any committee.”19 No wonder John Carver gives the following advice: “Have no more committees than is absolutely needed. . . . Committees can serve a useful function, but the propitious path is to start with no committees and add them only when clearly needed.”20 In other words, when starting the discussion, the only good committee is no committee at all. Is it possible to be an effective board with no committees? The better question for many board members is whether it is possible to

Chapter = c12

Date: Dec 13, 2010

Delegation

Time: 12:2 pm

161

be effective with committees. I worked with a new nonprofit on the east coast some years ago with a mission of preparing public school students to be ready for college. The 20 board members were so disappointed with their committee experiences on other boards that they decided to have just one committee—a committee of the whole board. Beyond that, they decided to use ad hoc committees and task forces whenever there was a clear need, but only if there were definitive expiration dates. To be fair, there are some boards solidly committed to old-school governance. In this model, the full board does very little other than rubber-stamp the recommendations of a great number of committees, including the executive committee that serves as the real board. This is an especially popular approach with very large boards where membership is bestowed on individuals for their contributions to the cause. As such, a board position often conveys significant status to its members who often must contribute substantial gifts to gain access. If committees are so frustrating, why on earth do they exist in the first place? First, many committees are in place because they’ve always been in place. It’s like the old joke about why the auditors crossed the road, which is because they did it that way last year. Committees are seen as something almost holy that has been passed down through the ages. Second, committees are often chartered in the bylaws, which are also considered a sacred text by many boards. Third, imitation is the sincerest form of flattery; if the local United Way has this or that committee, you need it, too. Fourth, some committees are born out of a need to give work to the board. If you have 28 members, you need more than a few committees if you’re going to give everyone something to do. What kind of damage do poorly designed committees do beyond the obvious waste of resources including time and the opportunity cost of that time? First, because the duties of the board are frequently ill defined and confusing, committees are typically designed to mirror staff functions. Personnel, facilities, marketing, and programming committees are good examples. This rarely leads to satisfactory results for either the committee or the staff. Rather than helping the board do its work, board committees formed in this manner often push the staff in directions that are ill considered and counterproductive. Like the well-meaning board member, the committee’s advice is often taken for instruction. Powerless to refuse the “boss of the boss,” staff members are pulled in two, three, or even more directions. Take organizations that employ a marketing director for example. The marketing director is almost always accountable to the executive director—and never directly to the board—when it comes to performance.

Chapter = c12

162

Date: Dec 13, 2010

Time: 12:2 pm

Governance

It is the executive director who is responsible to the board, but 3 out of 10 boards have marketing committees.21 So is the marketing director accountable to the board committee or the executive director? If you want a better example, consider the development committee that is present in 60 percent of all boards.22 Just whom does the development director report to? Is it the board committee or the executive director? Second, committees almost always bring single recommendations forward to the board for approval, which the board is then loath to deny. The committee worked hard on the major recommendation; do you really want to be the one to say no? This sort of rubber-stamping is certainly understandable, but it is held in contempt nonetheless. No wonder John Carver points out that rubber-stamping “enjoys de facto popularity while enduring rhetorical derision.”23 The better way to establish committees is to have form follow function with committees structured to help the board accomplish its duties, not to help the staff do theirs. Thus, an agency might have a board-level governance committee to recruit, orient, and assess board performance, but not have a board-level marketing committee, which would generally be considered a staff responsibility. Of course, in all volunteer agencies, the marketing committee may itself function as an unpaid staff-level committee. If staff members need a committee made up of board members to help out with advice, free labor, whatever, then they can certainly ask for that committee. Let the staff member chair that committee; let the staff member call the meetings and have accountability for its membership and results. It is a staff-level committee, not a board-level committee. This way, there’s no chance that the board will be emasculated later on when the staff member says that he or she was only doing what the board’s marketing committee said. After all, marketing isn’t a duty of the board; this is a staff level duty and that’s true even if the organization is made up of all volunteers. To be fair, sometimes there is a need for committees of board members that assist the staff. Such committees are especially prevalent in smaller organizations where the resources are too limited to fully staff these functions. The people on these staff-level committees help the staff get their jobs done and thus should report to the staff member in charge of the particular committee. There are two ways to go about deciding if you need committees. One way is to list all of your current committees, tally up the number of meetings and the amount of time used by each and every person involved, including preparation and follow-up, and then multiply the number of hours by a reasonable hourly rate; I like to use $100, which is triple the average hourly income for a full-time employee in America.24

Chapter = c12

Date: Dec 13, 2010

Delegation

Time: 12:2 pm

163

Separate the board-level committees that help the board do its job from the staff-level committees that help the staff do their jobs. Have a frank conversation about whether the expenditure of resources including the opportunity costs for each committee is worth it. Be sure to include the staff in the discussions. Eliminate any committees that don’t pass muster. Don’t study it ad nauseam; just do it. I once worked with a board that did this in less than an hour. The board and staff were all present, we had the bylaws with us, and we found that in the course of a year, there were 88 committee meetings that generated nearly 1,250 hours of effort on behalf of the participants at an opportunity cost of $125,000. Staff members were asked about the value of the committees that were supposed to be helping them do their jobs; committees that were supposed to help the board with its work were tested against the duties. In short order, the volume was cut down to just three board-level committees and no staff-level committees. The second way is to start with a clean slate and an open mind. Review the board duties and ask whether any of them require committee support. Take, for example, a board with the four duties outlined earlier. The duties to decide why and decide where to go tomorrow could foster a committee to develop the Results Now master plan. Ensure it gets done, yes, but develop the plan for full board approval, no. Though in especially large boards this could be tempting to do, the danger is that recommendations will be brought to the board for approval instead of discussion. Nothing on the board’s agenda is more important that deciding the mission and strategy. Nothing is a more stimulating antidote to the complaints of boring meetings and no red meat on the table. Do you really want to delegate it to a committee? Fortunately, most boards don’t delegate this activity; the planning or strategy committee doesn’t make the list of the seven most common committees.25 The duty to determine when it happened could lead to a finance committee or performance assurance committee, an audit committee, or program evaluation committee. Typically the board treasurer would chair committees like these simply because finances are a major focus. Although the finance committee is the second most popular,26 evaluation committees—like planning or strategy committees—may rob board members of the opportunity to become more knowledgeable. The same goes for a program evaluation committee. The duty to delegate who does what to the board might lead to a governance committee to recruit and orient new board members and assess board, committees, officers, and board member performance. This is the third most popular committee,27 and it is often chaired by the board member next in line to become the chair.

Chapter = c12

164

Date: Dec 13, 2010

Time: 12:2 pm

Governance

The duty to delegate who does what to the executive director might lead to an executive committee, which is the most popular of all committees on four out of five boards.28 Unfortunately, most executive committees are commonly chartered with much broader responsibilities, making it one of the most disliked by those who aren’t members. On one hand, the committee can be quite valuable, according to Warren McFarlan: Legally, the entire board is responsible for the health and governance of a nonprofit organization. But the executive committee provides the small-group atmosphere that helps members talk about problems on a more intimate basis. Members can discuss sensitive topics with less danger of damaging leaks and with greater likelihood of reaching a quick consensus on operational issues.29 But, as many boards have found out the hard way, there can be a significant downside: But there’s a big risk that an executive committee will turn into an “upstairs” board, whose members are in the know. Committee members get great emotional satisfaction out of this but it alienates the “downstairs” board members who aren’t on the committee.30 Whether a board has an executive committee depends on many variables and cannot be decided by fiat. A large board will have a greater likelihood of needing an executive committee than a small board. Some executive directors prefer having a carefully chartered executive committee that can be an intimate sounding board whether there is a large board in place or a small one. Still, there are three primary dangers to be aware of when it comes to working with or serving on an executive committee: 1. Rubber-stamping board. The full board has lost its independence. It is too submissive to authoritarian rule and is no longer asking pertinent question before voting. 2. Overstepping committee authority. The executive committee has extended beyond its stated authority without consulting the full board or gaining board approval. 3. Creating an elite subset of the board. The executive committee alienates other board members due to its special authority, resulting in the creation of a class system of the board.31 The executive committee does its greatest disservice when it keeps the rest of the board uninformed. To learn that the executive committee has made a major decision without taking the counsel of the rest of the members

Chapter = c12

Date: Dec 13, 2010

Delegation

Time: 12:2 pm

165

can be very off-putting and worrisome. The frequent excuse for creating this committee is that it is needed in case of an emergency, but this simply doesn’t wash. If it’s an emergency, shouldn’t the whole board be notified and involved? In this day and age of smartphones and voice-over Internet protocol, is there really any excuse for a situation in which the “‘downstairs’ board directors are so out of the loop so much of the time, they never hear anything but the official line”?32 Whether it’s the “downstairs” board member who finds out after the fact about excessive executive director compensation in the morning newspaper or who hears about the forced resignation of the executive director days after it happened, “upstairs” executive committees have a reputation for not informing the “downstairs” board of the goings-on until after the fact. This denies the board members the very information that they need to accomplish their legal responsibilities. The board must be very careful in the delegation section of its bylaws about what powers it delegates to the executive committee. The deciding factor in whether or not an executive committee is effective has much to do with the limits of its authority. An executive committee that has full authority to act for the board in the periods between full board meetings will likely end up creating an “upstairs-downstairs” board; an executive committee with a more focused charter may avoid that pitfall. Not all boards elect to follow the common three-committee structure of an executive, finance, and governance committee, however. Some boards have fewer committees; others have more, including the development committee. There are some who take the position that having a development committee is vitally important to the success of the fund-raising effort, and this often includes the development director. Others take the view that this lets the rest of the board members off the hook by creating a “special” committee to do the work. And, even worse, it can send a very confusing message to the executive director that implies this is a board-level job that requires his or her support, but not accountability. If it is the board’s intention to make it clear that fund raising is the responsibility of the professional staff, beginning with the executive director, empowering a board-level committee is hardly helpful in that cause. And if the development director wants the committee, by all means she or he can certainly power up a staff-level committee made up of board members. That is, provided that it is absolutely clear that the development director is the chair of this committee. The only time a board-level development committee might be appropriate is when its focus is on activities like special events or fund raising from board members and only when the board intends to hold itself accountable for the results. Even though the literature on committee duties is well articulated and readily available especially at BoardSource, having a discussion with the

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

166

Governance

TABLE 12.5 Executive Committee Duties Ideas

Results

– Okay lawsuits, handle some emergencies, handle the minutiae

1. Act for the board in between meetings with regard to nonmaterial issues or in the event of an emergency when the board cannot be reasonably convened. 2. Coordinate the full board’s review of the compensation and performance for the staff in general and the chief executive in particular. 3. Serve as a sounding board for the chief executive. 4. Focus the board’s work.

– Review CEO

– More current source – Agenda for board, ensure planning – Leadership, inform board

5. Coordinate the work of the full board.33

full board about the executive committee is useful primarily to establish the limits of its authority. Table 12.5 shows the results of such a discussion at a fair-housing agency. Beyond the executive committee, an extended discussion of committee duties is usually unproductive simply because there is so much literature on the topic, including useful templates from BoardSource. Following, for example, are the broadly stated responsibilities of the finance and governance committees, which are the second and third most popular committees respectively:34 The finance committee is responsible for monitoring the organization’s overall financial health. Its core duties include overseeing budgeting and financial planning, safeguarding the organization’s assets and reviewing its insurance coverage, reviewing and proposing internal controls and fiscal policies, anticipating financial problems, and ensuring that the board receives accurate and timely financial reports.35 The governance committee is often responsible for assessing the board’s current composition and identifying needs, developing board member and officer job descriptions, creating a recruitment plan and timeline, identifying and cultivating prospective members, and coordinating officer elections. In addition, the governance committee may be responsible for broader board management issues, such as reviewing board policies, board self-assessment, and a board action plan.36

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

Delegation

167

OFFICERS Expecting the board to manage itself, as some people believe, is unrealistic for Richard Hackman, one of the greats when it comes to research on groups: Managers who hold this view often wind up providing teams with less structure than they actually need. . . . The unstated assumption is that there is some magic in the group interaction process and that by working together members will evolve any structures that the team actually needs. . . . It is a false hope; there is no such magic.37 The importance of selecting the right people to lead the board cannot be overstated. The officers of the nonprofit have a challenging job and the board chair in particular must be very skilled. Turning to team literature can be instructive about the responsibilities of the officers. Jon Katzenbach and Douglas Smith, in The Wisdom of Teams, lay out six major responsibilities:38 1. 2. 3. 4. 5. 6.

Keep the purpose, goals, and approach relevant and meaningful. Build commitment and confidence. Strengthen the mix and level of skills. Manage relationships with outsiders, including removing obstacles. Create opportunities for others. Do real work.

The best place to begin the discussion about officer duties is in the bylaws of the organization; just remember that bylaws are not cast in stone and can usually be amended without much difficulty. You will typically find four board officers at a minimum: Chair, Vice Chair, Treasurer, and Secretary. Some boards will have more officers; others will combine the secretary and treasurer positions to have fewer. You can then turn to the literature available at BoardSource to compare or change the job descriptions. For example, The Nonprofit Policy Sampler offers seven different variations for the board chair and offers the following introduction to this office: The job of the board chair is one of the most challenging roles in the nonprofit world. A successful chair inspires a shared vision for the organization and its work, builds and nurtures future board leadership, and manages the work of the board. This position demands exceptional commitment to the organization, first-rate leadership qualities, and personal integrity. For many boards, success may rest heavily on the individual chosen to lead it.39

Chapter = c12

Date: Dec 13, 2010

168

Time: 12:2 pm

Governance

The average term of service for a board chair is 1.8 years, and the number of consecutive terms is about two.40 And that’s if you’re lucky. In my 22 years as an executive director, I had 14 chairs, and never longer than two years. But by having the vice chair become the chair and by keeping the retired chair on the board until he or she was replaced, transitions were relatively stable. So instead of a single board chair, I would have a troika of high-quality leaders. And this also served as an antidote to having a problem chair as occasionally occurs. To improve your chances of success, there are just a few characteristics to keep in mind: Most team leaders must develop skills after they take the job. Those who succeed have an attitude that they do not need to make all key decisions nor assign all key jobs. Effective team leaders realize that they neither know all the answers, nor can they succeed without the other members of the team. The wisdom of teams lies in recognizing that any person, whether previously an autocrat or a democrat, who genuinely believes in the purpose of the team and the team itself can lead the team toward higher performance.41 The right chair can bring out the best in the board and can help the board become give-and-take in its exchanges. He or she can keep the board on task, allow time for thoughtful reflection, and bring the question to a satisfying conclusion. Part-time keeper, part counselor, the board chair is often the deciding factor between a good board and an extraordinary one. As BoardSource’s Robert Gale puts it, “There is no way around it: Effective organizations are led by effective boards and effective boards led by effective chairs.”42

Board Member Duties When asked about the duties of a board member, Sharon Percy Rockefeller, CEO of WETA in Washington, recounted the following experience: When I joined the board of Stanford University, I asked an older, more experienced board member what I was supposed to do. He said to me, “Your main job is to ask why.” I’ll never forget that. A board member’s role is simple. Ask why. Why do we have that priority? Why are we doing that now? Why aren’t we doing that now? Board members ask these questions out of duty, but also because they care.43 The path to great board members is uncomplicated according to Frank Larson and Carl LaFasto:

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

Delegation

169

To create an effective team . . . First, make sure that the goal is clear, the performance goal crystallized. . . . Then, select good people, members who possess the essential skills and abilities to accomplish the team’s objectives. . . . Finally, foster high standards of excellence.44 The strategic plan gives a clear goal, and the guidelines to be discussed later address the standards of excellence, but what about good people, what about board members? In his bestselling book, Good to Great, Jim Collins found that the for-profit leaders who took their companies from good to great didn’t first decide “where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.” In the nonprofit sector, however, Jim Collins sees something different: In the social sectors, where getting the wrong people off the bus can be more difficult than in a business, early assessment mechanisms turn out to be more important than hiring mechanisms. There is no perfect interview technique, no ideal hiring method; even the best executives make hiring mistakes . . . it makes selection all the more vital.45 So instead of getting people off the bus, nonprofits shouldn’t put them on in the first place. The problem here is that “‘give, get, or get’ off is at the heart of nonprofit boards.”46 So how can we honor Jim Collins’s recommendation to first get the right people on the bus? We can try, but it’s very difficult. The good news is the others have dismissed concerns about finding just the right members. In Jon Katzenbach and Douglas Smith’s research, they “did not meet a single team that had all the needed skills at the outset . . . as long as the skill potential exists; the dynamics of a team cause that skill to develop.”47 Fortunately, the delegation section makes the recruiting process much more effective and efficient. By knowing the duties and guidelines for the board member, potential candidates can be found who at least understand the expectations up front and can answer the call in an informed manner. Like all duties, using the BAM process is the most uncomplicated way to proceed. Table 12.6 lists the duties of board members at an agency that serves the families of children who are hospitalized.

Executive Director Duties The four major duties of the board are to decide why, decide where to go tomorrow, delegate who does what, and determine when it happened. These

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

170

Governance

TABLE 12.6 Board Member Duties Ideas

– – – – –

– Familiarize yourself with bylaws, know the mission, do your homework, be prepared. Attend 75% of full board meetings. Offer solutions, participate. Ask hard questions, have courage. Don’t be afraid to vote. Be a willing participant, serve on committees, participate in projects.

– Be an ambassador, protect the brand, involve outside organizations, promote. – Financial support. – Go on calls. – Offer your expertise, give wise counsel. – Trust each other, motivate each other, get to know each other. – Hold each other accountable.

Results 1. Exercise the duty of care.48 a. Prepare.

b. Attend. c. Participate actively. d. Ask hard questions. e. Vote conscientiously. 2. Do the work of the board, including serving on committees and attending events. 3. Champion the organization to and from the community. 4. Contribute generously. a. Make a generous personal contribution. b. Actively participate in fund raising. c. Share your expertise. 5. Support each other. 6. Hold each other accountable.

match up with four of the five essential questions, but what about question of what gets done today? This duty—deliver what gets done today—belongs to the executive director. To be sure, neither the board nor the executive director operates in a vacuum; it takes a partnership to address many of the details implied in these duties. Yet how involved should the board be in determining the answer to this question? As is the case with many of the issues that come up in Results Now, the answer is “It depends.” Some boards with an earlycareer executive director might indeed have great input into setting goals for staff departments, but this is rare for organizations with seasoned staff. Some boards want to see staff goals; other boards don’t. With this said, the common response is that the executive director is accountable to deliver what gets done today along with just one other duty as shown in Table 12.7 that lists the results from a management services agency. What does it mean to enable the board? The official dictionary definition applies, “1. to make able; give power, means, competence, or

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

171

Delegation

TABLE 12.7 Executive Director Duties Duties – Implement objectives, right staff, hire/fire, say “no” when necessary, secure funding, research other programs, guide operations, manage staff, presence in the community, provide leadership, spokesperson, fiduciary, scan environment, evaluate staff – Inform the board, challenge board, don’t let the board micromanage

Results 1. Deliver what gets done today.

2. Enable the board.

ability to; authorize . . . 2. to make possible or easy . . . 3. to make ready; equip.”49 Some observers say that it is the job of the board to help itself.50 Others say that seven realities of the board make this implausible. Robert Herman and Dick Heimovics are definitive about this matter, which they characterize as executive centrality wherein “chief executives can seldom expect boards to do their best unless chief executives, recognizing their centrality, accept the responsibility to develop, promote, and enable their boards’ effective function.”51 Put simply and in the words of the late Kenneth Dayton, “if the board is to do its job, the CEO must enable it to do so.”52 The argument of executive centrality runs counter to how we typically think organizations function hierarchically. As discussed earlier, the normative model of nonprofits would strongly suggest that Jerry “help me help you” Maguire is the executive director and Rod “show me the money” Tidwell best represents the board. After all, that a subordinate would be held accountable for the performance of his or her bosses is simply unthinkable. But this is the reality in a world where the most effective executive directors understand the centrality of their role and act on it.53 I vividly recall my own eye-opener about this concept. I had prepared my annual performance appraisal for the executive committee to review, which was part of that committee’s charter. The appraisal covered my individual performance plan written a year earlier including the goals we agreed upon and how things had turned out. In addition, I supplied a list of salaries from a group of peers in our industry. Time passed and having heard nothing about the report, I called the chair of the board. He indicated that he had read the report, but needed additional information about compensation including the list of peer salaries. After a long pause, I indicated this information was part of the report that he had just read. Another long pause. And then he said that I only

Chapter = c12

Date: Dec 13, 2010

172

Time: 12:2 pm

Governance

had myself to blame if I was disappointed that he hadn’t read the report thoroughly. He then proceeded to recount the many events leading up to his selection as a chair of the board including his original recruitment. At each and every step, he told me that I had been very involved. And he was right. If there was anyone to blame, it was I. I could have done better either by helping him do his best or by having seen earlier that he was not up to the task. This is not to say that the board is completely absolved of its responsibilities in the executive-centrality approach: Boards are still expected to do much, but they are not expected to do things on their own. Chief executives are expected to provide boardcentered leadership. Chief executives do not usurp the board’s roles and responsibilities, however. Rather, effective chief executives know that helping their boards to meet their responsibilities is the best way to maximize effectiveness.54 A Results Now board is most certainly not a rubber-stamp board, but it does have high expectations for the executive director. After all, “since chief executives are going to be held responsible and since they accept responsibility for mission accomplishment and public stewardship, they should work to see that boards fulfill their legal, organizational, and public roles.”55

Guidelines Guidelines differ from agency to agency depending upon many factors. As Jim Collins and Jerry Porras observe in their bestselling Built to Last and in referring to values, “The crucial variable is not the content of a company’s ideology, but how deeply it believes its ideology and how consistently it lives, breathes, and expresses it in all that it does.”56 Guidelines are a member of the values family, but more specific in texture, more behavioral, and are meant to guide you in a particular course of action. Guidelines are designed to be “seeable” in the actions of people. Guidelines “define those relevant and very intricate expectations that eventually determine the level of performance a team deems acceptable.”57 Thus, unlike values, which are like the car that you drive, guidelines are akin to how you drive the car.

Board Guidelines Because the committees and officers serve to help the board do its job, many boards will use a common set of guidelines for the board, committees, and

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

173

Delegation

TABLE 12.8 Board Guidelines Ideas

Results

– Do important work, support mission, be productive, on subject, stay focused, use time effectively, start/end on time, don’t waste time, not boring – A proactive and “give-and-take” board, be active, evaluate committee reports, board participation, interactive, review status, respect each other, positive, be happy, no personal agendas, not constant confrontation, professional, feel valued, cooperate, respectful of each other, open, honest – Not meddle, remember board’s role, board job versus staff job, respect chain of command, not involved in operations, value CEO’s opinions, motivate executive director, love, nurture, follow up, hear what staff says, respect, staff experience, be consistent, be fair, set clear expectations

1. Focus talent and time on important work.

2. Be a give-and-take board that respects the diversity and strength of all its members. 3. Govern the organization—not manage it.

officers, as illustrated in Table 12.8 by this set from a suicide prevention center. Table 12.9 is a different and larger group of guidelines from an agency that helps the families of sick children.

Board Member Guidelines Like the duties that were different for the board as a collective and the board member, guidelines are also distinct and will generally include answers similar to those from the agency serving families of hospitalized children shown in Table 12.10. Such explicitly crafted guidelines can be very helpful in the recruiting process for new board members as they tell the board member exactly what will be expected of him or her. Rather than finding out the ins and outs of expectations after the fact, the prospective board member has the needed information to make the commitment to serve. Furthermore, the guidelines offer the board the opportunity to size the potential candidate up against the expectations. To be sure, there are people who shouldn’t be recruited for the board under any circumstances, no matter how much potential they might have, no matter how much everyone can learn needed skills, no matter how great the ability to “give or get.”

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

174

Governance

TABLE 12.9 More Nuanced Board Guidelines Ideas

Results

– Fun, know board members, celebrate! – Effective time, less reports, if you can write it/no need to speak it, info ahead of time and no repeats, start on time, right info in advance, structure, agenda – Respect each other, open/honest, motivating, resolve the cliques, participation, brain storming – issue focused, mission focused, call the question, action oriented, hard questions, accomplish something, willing to ask hard questions, about the house—not the personality, what can I do to help, important issues – Too much detail

1. Enjoyable and sociable 2. Focused and efficient

– Informative, review important information, hearing more about the families, educational, summary of committee meetings, grant involvement, what’s staff doing, review mission

3. Give-and-take, not show-and-tell 4. Important work

5. Keep information short and simple 6. Informative and educational

First is the individual who is unwilling or unable to let go of his or her personal agenda when it conflicts with what the team needs. As Carl Larson and Frank LaFasto note: Especially intense among teams that are struggling, but more likely than anything else to be noted as a problem across all teams . . . is that the team allows individuals to place self-interest above team-interest. Tolerating members who are more self-oriented than team-oriented is the most common complaint.58 Independent thinking is not the killer of a board when it’s aligned with the needs of the organization and the board. It’s not all right when that personal agenda gets in the way of the team. Said the great basketball coach Red Auerbach, “The team is more important than any individual. If some guy couldn’t live with that, my philosophy was to let him go and ruin the chemistry of some other team.”59 People who let their personal agendas get in the way or who simply can’t get along with others may be difficult to identify until after they’ve

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

175

Delegation

TABLE 12.10 Board Member Guidelines Ideas – Conflict of interest, integrity, ethical behavior – Support the voice of the board, no parking lot chatter, support decisions

– Put house first, meet/exceed loyalty – Keep confidences – Listen, concise, don’t dominate others, inclusive, think critically, be willing to learn, respect opposing viewpoints, open, honest, pull out ideas from each other, mentor members – Set an example, friendly, professional attitude, do it, deliver, do what you say you’ll do, accountable

Results 1. Exercise the duty of loyalty.60 a. Disclose any potential conflicts of interest. b. Speak with one voice, including majority decisions not personally supported. 2. Exercise the duty of obedience.61 a. Stay true to the mission. b. Keep confidences. c. Respect each other.

d. Follow through.

spent some time on the board. As a consequence, there may be no way to avoid having these people on the board, but it is absolutely vital to deal with them when they are identified. Second, there’s the person who simply can’t get along with others no matter how much training or coaching they’ve been given. Why is this so important? James Brian Quinn, Philip Anderson, and Sydney Finkelstein provide one answer: “Information sharing is critical because intellectual assets, unlike physical assets, increase in value with use. Properly stimulated, knowledge and intellect grow exponentially when shared. All learning and experience curves have this characteristic.”62 What experienced board members sometimes forget is that every time someone new joins the board, the board team in essence has been reformed. Allowing time and consideration for building the new board team is an important matter that gives significant import to orientation processes. Starting out with a retreat or social event that brings the new members into the fold can pay handsome dividends. Pairing the new member with a seasoned member in a mentoring relationship can also be quite useful. Another way to help is to change the mix of the board less frequently; instead of every year, every other year can help build cohesion and stability.

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

176

Governance

Executive Director Guidelines Because the greatest responsibility for implementation of the Results Now master plan is typically delegated to the executive director, the bulk of the guidelines are related to that individual. These guidelines often include treatment of customers, treatment of staff, financial planning and budgeting, financial condition and activities, asset protection, compensation and benefits, and communication and support of the board. By spelling out guidelines in advance, the board relieves itself of worry that the executive director might be conducting business in a manner at odds with its wishes. No one person—board member, executive director, supervisor, or even parent—can possibly monitor or approve every decision. Instead, you set guidelines that establish clear boundaries of acceptable behavior. Indeed, one of the easiest ways to stimulate additional ideas for guidelines is to ask participants what they don’t want to have happen. This is consistent with John Carver’s executive limitations where the “board should remain silent except to state clearly what it will not put up with.”63 In a board meeting not too long ago when the executive director’s guidelines were constructed, a participant insisted that the budget should not vary at all from the final results. Once set, the budget was not to be breached under any circumstances. It didn’t take but a moment for other board members to confront the impossibility of this demand. “The second the budget is printed, it is obsolete,” one board member commented, “It’s senseless to expect perfect tracking, things change too rapidly.” It would be more sensible to establish a broader guideline like an allowable percentage or amount that requires the executive director to inform the board treasurer if it will be missed. Like the budget, the organization cannot be held in check waiting for approvals from the board. An approval-oriented board leads to management gridlock as the staff waits for board permission or, even worse, insubordination as the staff takes necessary action without approval. Because the guidelines preapprove most activity, it allows the board to concentrate on more important work—work related to the strategic plan or helping the executive staff raise funds. Executive director guidelines could simply begin and end with a statement similar to the following: The executive director will conduct himself or herself with the highest business and professional guidelines at all times, never causing or allowing any practice that is illegal or unethical. It is a reality that the board cannot speak about every detail; the executive director must make decisions about matters that are not detailed in the guidelines or are not detailed at a specific enough level. That is why the

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

177

Delegation

controlling statement mentioned earlier is used as a safety net and the executive director guidelines should contain a section on reasonable interpretation similar to the following: With regard to interpretation of these guidelines, the executive director will use reasonable interpretation, the same interpretation as an ordinarily prudent person would exercise in a like position and under similar circumstances. Most boards will not stop with these two statements, however, and will add sections including finance, personnel, communication to the board, risk assessment, planning, and fund raising, among others, as Table 12.11 illustrates.

TABLE 12.11 Executive Director Guidelines Ideas

Results

– Internet bad stuff, unethical behavior, don’t run off with the money, be legal, don’t lose sight of strategic plan, duty of loyalty, report status versus goals, don’t talk with other agencies for merger without talking to board first

1. The executive director will conduct himself or herself with the highest business and professional guidelines at all times, never causing or allowing any practice that is illegal or unethical.

– Development, AFP, compliance with national and United Way – Mismanage endowment funds

2. With regard to interpretation of these guidelines, the executive director will use reasonable interpretation, the same as an ordinarily prudent person would exercise in a like position and under similar circumstances. 3. With regard to development, the executive director will follow the standards set by the Association of Fundraising Professionals. 4. With regard to endowment funds under management, the executive director will: a. Invest in funds with annual three-year and five-year performance of at least the top quartile. b. Invest in funds with manager tenure of at least five years. c. Invest only in funds that follow the investment standards established by the local community foundation. (Continued)

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

178

Governance

TABLE 12.11 (Continued) Ideas

Results

– Protect the organization, have proper insurance

5. With regard to risk assessment and management, the executive director will protect the company’s assets and earning power by using proper risk management techniques.

– Don’t disrespect staff, personnel handbook, turnover, poor morale, poor pay, poor management, complacency, burnout

6. With regard to personnel matters, the executive director will: a. Treat the staff and volunteers fairly and respectfully. b. Establish, communicate, and implement effective personnel policies that are reviewed by independent counsel annually. c. Establish, communicate, and implement clear accountabilities for staff and monitor performance accordingly. d. Pay compensation at a level required to attract and retain the qualified staff needed. e. Advise the board before making a hire-or-fire change in personnel at the senior level. 7. With regard to communication to the board, the executive director will: a. Provide information to the board, committees, officers, or board members in a timely manner that could have a significant impact on the company or in any way cause embarrassment. b. Send information in advance of board meetings by at least one week. c. Help the board in its implementation of the master plan. d. Not burden the board with insignificant issues that divert focus. e. Inform the board if it is burdening the staff with insignificant issues that divert focus. f. Foster a relationship with the board based upon trust and respect.

– No surprises, staff changes, serious allegations about clients, keep board up to date, don’t manipulate board, don’t let board waste executive director’s time

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

179

Delegation

– Positive margin from operations without investment income, live within budget, financially prudent, clean audit, deal with management letter, stay on top of budget, lend money, don’t invade endowment

8. With regard to financial matters, the executive director will: a. Make no capital acquisition of greater than $10,000. b. Draw no more than 5 percent income annually from endowment investments. c. Have and follow an audit-proof procedure for handling income and disbursements. d. Receive a clean audit and comply with any recommendations outlined in the accompanying management letter. e. Not take on any debt including lines of credit. f. Achieve a positive budget surplus annually of income over expenses. g. Present budgets with a probability of occurrence of at least 80 percent. h. Not borrow or lend funds.

If at any time, the board—or the executive director, for that matter— wants more or less detail, it takes a simple vote to make it so. This brings up an important question: How should the board and executive director ensure that all of the necessary guidelines are included? One of the best ways to do this is to make use of standards promulgated by others as shown in the following topic headings from the Ohio Association of Nonprofit Organizations (OANO) Standards of Excellence and from the Better Business Bureau’s (BBB) Wise Giving Alliance Standards for Charity Accountability. OANO—23 standards in eight categories64 ■ ■ ■ ■ ■ ■ ■ ■

Mission and program Governing body Conflict of interest Human resources Financial and legal Public accountability Fund raising Public affairs and public policy

BBB—20 standards in four categories65 ■ ■

Governance and oversight Measuring effectiveness

Chapter = c12

Date: Dec 13, 2010

Time: 12:2 pm

180

■ ■

Governance

Finances Fund-raising and informational materials

Guidelines are ultimately triggers that cause the executive director to bring matters to the board for discussion and perhaps exemption. It is not always possible for the surplus to be met, for example, as circumstances with budgets change unexpectedly. The guidelines implicitly require that the executive director inform the board of variances in a timely fashion; by doing so, confidence and trust are built, and the partnership between the board and the executive director is strengthened.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

CHAPTER

13

Accountability What gets measured gets done. —Maison Haire

I

t was a March Sunday afternoon in downtown Dayton when the new Schuster Center for the Performing Arts opened. The $130 million project included the 2,300 seat nonprofit performing arts center; a private-equity mixed-use condominium tower for private residences, office condominiums, and rental spaces; parking garages, restaurant, and catering operations; and a huge wintergarden. The head of programming had planned an ambitious early afternoon ribbon cutting ceremony including a vertical ballet of dancers rappelling up and down the face of the 13-story condominium tower. After this, the public would proceed into the beautiful three-story wintergarden with its live palm trees and three-story glass walls and then into the theatre for a 30-minute show, which would be repeated by different performers for new groups of people on the hour throughout that day. Though we had prayed for lamb-of-spring weather, the day turned out to be a howling lion of winter. The publicity director had done a masterful job of hyping the opening and instead of the 20,000 people expected for the day, the number of people who actually showed up was reported at 70,000 by the Dayton Daily News. To make matters much worse, when the city fire department saw the huge crowd, they justifiably insisted that everyone wait outside because the wintergarden was the primary exit for the people inside the theatre. What if there were a fire and people had to get out fast? Now imagine the huge crowd with looks of claustrophobic fear in their eyes and bodies pressed against the thin glass walls of the empty—and deliciously warm—wintergarden.

181

Chapter = c13

182

Date: Dec 8, 2010

Time: 1:11 pm

Governance

Memory is frail, but I swear to this day that as the firemen, volunteer ushers, staff members, and everyone else slowly backed away from the three-story high glass walls and the crowds pressing inward, I was the only one left standing alone in the middle of the wintergarden. As the walls of glass began to bow inward. I was a deer in the headlights; hell had truly frozen over. When the press converged en masse that night just in time for the late news, it wasn’t the head of programming or the board chair that addressed the cameras and apologized for the near disaster; it was I and I alone. And what was my excuse? I had no excuse, none, nada; I had failed in my responsibilities. The headline in the Dayton Daily News was succinct: “Schuster Flubbed Open House.” What follows is just a taste of the front-page article: Who says you can’t get people to come to downtown Dayton? Some 70,000 braved the cold for the community open house at the Schuster Center on Sunday. But what started out as a feel-good event now has the makings of a full-scale public-relations disaster. Some of that can be attributed to poor planning, and some of it to the unexpected crowd size. . . . “My pledge is to make the customer the star, and I did not fulfill that promise on Sunday,” Mark Light acknowledged.1 By the time the doors closed that night, thousands of people had been disappointed by the incredibly long waits, the biting cold, and the obvious lack of foresight on our part; one performer had danced her way off the stage into the orchestra pit and then to the hospital. It was one of the worst days of my career. It goes with the job of leadership that the buck stops at your desk. As the late, great Coach Paul “Bear” Bryant once said, “If anything goes bad, I did it. If anything goes semi-good, we did it. If anything goes really good, then you did it.”2 But I really was responsible from more than a symbolic standpoint. What had gone wrong? On the upside, I had been spot on with delegation, clearly articulating duties and guidelines to the programming director; she was clearly in charge, had full authority to do the job. Moreover, she was a brilliant and very experienced executive and she had the benefit of seasoned outside counsel who had opened other arts centers. On the downside, I was an utter failure at ensuring accountability. Though I had sat in on a few of the discussions about the opening festivities, these were at least six months earlier. I had so much faith in the team assembled that I simply abdicated my responsibility to ensure that they were on their game, that they were accountable for their actions. I walked my talk, but didn’t insist that anyone else do the same. Had I done so, I could have asked hard questions that might have uncovered the flaws

Chapter = c13

Date: Dec 8, 2010

Accountability

Time: 1:11 pm

183

that led to hell freezing over. This is why board members should never be uncomfortable asking the hard questions of the executive director. You never know when a hard (or stupid-sounding) question will unlock an insight that saves the day. It is one thing to walk your talk and quite another to be held accountable for that talk. The willingness to shoulder accountability is akin to what Jim Collins describes when he says that his 11 good-to-great leaders looked “in the mirror, not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or bad luck.”3 Put simply, accountability “essentially means being required to answer, to take responsibility, for one’s actions.”4 In my study of high-performing leaders, walking one’s talk and taking responsibility for that talk—authenticity and accountability—were clearly evident. One panelist said, “I don’t care much if people like me, love me, or admire me, but I want people to say, ‘You know, she pretty much does what she says she’s going to do and is straight up with you.’” Relative to being accountable, another said quite simply, “Leaders who cannot admit they made a mistake are doomed for failure.” A third described it this way, “When something is happening, some crisis, you can’t go ‘Oh gosh,’ or ‘This is awful. I can’t do this job.’ Yes, this is going to go wrong and next week something else will be the issue. You have to have fortitude.” Another said quite simply, “The buck stops here.”5 Accountability is where the other Results Now elements are put to the test of when did it happen. Instead of the reactive approach that often seeks accountability after the fact, Results Now is proactive about accountability. Accountability begins with agendas—when we are going to require an answer—and ends with assessments—what tools we use to get the answer.

Agendas There are only two agendas needed in Results Now. First is the annual agenda for the board’s work in the coming year. Second is the board meeting agenda.

Annual Agenda The annual agenda is ultimately about doing important work and this includes whether the desired results are on track. From executive director performance to the cycle for making a new Results Now master plan for the coming fiscal year, the annual agenda is more than just a monitoring schedule. It can also become “meeting central” by being the common platform for planning meetings and basic agendas for an entire year.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

184

Governance

TABLE 13.1 Basic Annual Agenda Who—When—Where

What

Full Board—January 24 3:30–7:00 Main Hall Full Board—March 28 3:30–5:00 Main Hall Full Board—April 26 4:30–7:30 Community College Full Board—May 18 3:00–7:00 Full Board—July 25 3:30–5:00 Main Hall Full Board—August 17 or 24 TBD Full board—September 26 3:30–6:00 Main Hall Full board—November 3:30–6:00 Main Hall

Last year’s Results Now master plan review TBA Quarterly financials/This year’s Results Now master plan review/Volunteer recognition dinner Grant site visit/Fish fry Quarterly financials/This year’s Results Now master plan review Donor recognition and future fund event Next year’s Results Now master plan discussion Annual meeting—officer elections/Year-end projections/Budget presentation/Results Now master plan presentation and approval

Evaluation of performance is very important in ensuring that the Results Now Master Plan is effectively implemented. Frequently, however, boards and staff often cannot decide what should be monitored, when it should be monitored, and by whom. The annual agenda is a reporting schedule that addresses these issues quickly and practically. Table 13.1 is an agenda from a group helping the families of sick children. The timing of the process to develop the next Results Now master plan plays a role in the annual agenda. While monitoring of performance is vital on its own, this information can be extraordinarily helpful in developing the next plan. The agency above has eight meetings, of which seven have a central meeting content, a purpose for convening. If a credible reason to convene cannot be clarified for the March 28 meeting, a strong argument should be made to cancel it. Purely a form-follows-function approach, the annual agenda builds the board’s work around the Plan. Some boards will stop at this point of completion. Other boards will use the annual agenda as “Agenda Central” to communicate other meetings including committees and the like. Table 13.2 is an example of an organization with six full board meetings a year that used its annual agenda as meeting central.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

185

Accountability

TABLE 13.2 Comprehensive Annual Agenda Who—When—Where

What

Executive Committee TBA

Executive director’s individual plan

Full Board—February 8:30 am–11:00 am Boardroom

Last-year strategic plan results Current-year strategic plan review

Full Board—May 8:30 am–11:00 am Boardroom

Field trip to study service delivery through hands-on shadowing

Executive Committee TBA

Delegation section—executive director’s duties Executive director’s individual plan Executive director’s compensation

Governance Committee TBA

Delegation section—board duties and guidelines New-year directors and officer slate

Assurance Committee TBA

Delegation section—executive director’s guidelines Last-year leadership section—audit review

Full Board—July 8:30 am–11:00 am Boardroom

Current-year strategic plan review Strategic plan first draft

Executive Committee TBA

Executive director’s individual plan New-year Executive Committee goals

Governance Committee TBA

Delegation section—board duties and guidelines New-year directors and officer slate New-year Governance Committee goals

Assurance Committee TBA

Delegation section—executive director’s guidelines Last-year leadership section—audit review New-year Assurance Committee goals

Full Board—September 10:30 am–1:00 pm Boardroom

Current-year strategic plan review Operating plan and governance plan first draft

Full Board—November 8:30 am–11:00 am Board Room

Results Now master plan first draft

Executive Committee TBA Full Board—December 4:30 pm–9:00 pm Boardroom

Executive director’s individual plan Results Now master plan final draft Annual meeting Celebration dinner

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

186

Governance

Notice in this layout that the six full board meetings are staggered by the needs of the organization with just two full board meetings in the first half of the year when the organization is working its plan and it is arguably too early to be thinking about the new year. Things ramp up in the second half where there are four meetings. When it comes to good governance and armed with an annual agenda, board members can schedule meetings that matter. And there is no rule that the meetings can’t be as long as necessary and scheduled at convenient times when people are at their best. How many meetings a board holds depends on many things. A board with 60 members will likely have a smaller executive committee and quarterly meetings for the full board. You cannot help but wonder if quarterly meetings are a useful schedule even for a large board. If a board member cannot attend just one meeting, he or she will be absent for half a year. Perhaps this explains why the average number of meetings is about seven and the length is roughly 3.3 hours.6

Board Meeting Agenda One of the best ways to ensure accountability is to build it right into the board’s agenda. The following example of a board meeting agenda effectively demonstrates the relative importance of agenda items; the central meeting content and accountability sections take up two-thirds of the time available. Furthermore, notice that the time for all items is specifically allotted making it possible for the board chair to do his or her job more effectively as shown in Table 13.3. TABLE 13.3 Board Meeting Agenda Topic 1. Call to Order a. Minutes of last meeting b. Consent agenda 2. Accountability a. Financials b. Executive director summary c. Governance assessment 3. Central meeting content 4. No surprises 5. Chair’s comments 6. Open discussion 7. Governance assessment 8. Adjournment

Convener Chair

Treasurer Executive director TBA TBA Executive director Chair Chair Chair Chair

Minutes 5

10 10 10 60 5 5 10 5 120

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

187

Accountability

The two agendas shown in Tables 13.2 and 13.3 are neither complex nor difficult to construct. In most organizations, it takes very little time to put them together. What makes them so remarkable is that most organizations don’t do them. Yes, boards will almost always set meetings a year in advance and some will set committee meetings that far out as well. Few boards, however, set the agendas in advance and instead default to a show-and-tell reporting style that uses the same agenda for each meeting. The executive director calls the chair about two weeks before the meeting and asks what’s on the agenda or, even more likely, the last meeting’s agenda is simply used. The better way is to take the bull by the horns and decide what work needs to be done in advance, well in advance.

Assessments It is all well and good to set up a schedule for monitoring, but what assessments should be used? As with all the elements of the governance plan, less is more, simple is better. Though there are a wide variety of assessments done within an organization including individual performance, Results Now is interested in just three: the full board, the board members, and the executive director.

Board Because the full board is only constituted at meetings, a simple assessment built around the duties and guidelines specific to the agency is a practical alternative as Table 13.4 shows. TABLE 13.4 Board Assessment Board Duties: Circle how well the full board is doing (4 =best) Decide where to go tomorrow Determine when it happened Delegate who does what

1 1 1

2 2 2

3 3 3

4 4 4

1 1

2 2

3 3

4 4

1

2

3

4

Board Guidelines: Circle how well the full board is doing (4 =best) The board focused its talent and time on important work The board was a give-and-take board that respected the diversity and strength of all its members The board governed the organization—not managed it Comments What should we discuss at upcoming meetings? What did you like about the meeting? What did you not like about this meeting?

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

188

Governance

Managing this assessment is fairly simple. At the conclusion of the board meeting, give it to the members, ask them to fill it out anonymously, turn it in, tabulate the results, and attach them to the minutes. If doing the full assessment requires more effort than you want to expend, think about doing it less frequently, say twice a year instead of at every meeting. Or can cut the duties, but leave the guidelines and the comments. Or cut everything except the comments, which are very useful for improving the meetings. Moreover, the questions in the comments section can be changed as the need arises. Once you affinity-group the comments, you can gain a solid picture of what’s working and not working. Tables 13.5 and 13.6 are two very different sets of comments. The comments in Table 13.5 followed a board retreat that was particularly stimulating; those in Table 13.6 followed a regular board meeting.

TABLE 13.5 Board Comments from a Retreat What should we discuss at upcoming meetings? Strategy – Where our focus should be as we move forward to beef up or expand services – Strategy and direction – Funding diversification Governance – Attendance standards – Brief discussion on results of where we are – Continue the open dialogue What did you like about this meeting? Give-and-take atmosphere – Open discussion – Hearing voices I did not know – Hearing all voices – Everyone’s participation (for those who attended) – Open and candid discussions Building community – It gave us an opportunity to bond as a board Clarifications – Resolved issue that I had – Clarified roles and responsibilities What did you not like about this meeting? – Concern about saying things that funders on board might not like to hear

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

189

Accountability

TABLE 13.6 Board Comments from a Regular Meeting What should we discuss at upcoming meetings? Strategy – Ongoing changes in vision and mission with emphasis on specific direction – 2008, future – Strategies for the future – How do we compare to other nonprofits – Operations – How we are impacting those we serve (mission moment) – How others (the public) might view that our organization is so sound when we are asking for funding. – Always finances Delegation – Role of the officers and role of each committee—with membership designation for each committee Governance – Recap the last meeting, as not all were in attendance . . . it was an important meeting – Brief report/update from each committee—where they are, what they have done, where they are going – Issues heatedly discussed in December – Political influence on discussions (i.e., politicking on a specific issue prior to meeting) What did you like about this meeting? Give and take – Active discussion on bylaw revisions – Differences of opinion and points of view – Good dialogue – Sharing, openness, genuine caring, differing opinions surfaced – Honest discussion – Good discussion Focus – How our executive director was so on top of everything. I think she gave the lengthy meeting energy. Information counts – Mission moment – Informative – Lots of info What did you not like about this meeting? Leadership – President not there, it was a crucial meeting, crucial votes Transparency issues – Personal agendas (Continued )

Chapter = c13

Date: Dec 8, 2010

190

Time: 1:11 pm

Governance

TABLE 13.6 (Continued ) – This was the annual meeting. Important changes were being proposed by the governance committee. There was no prior discussion on any of the proposed changes, yet committee met all summer. Conflict of interest was present on governance committee. Outcome remained contentious. Use of time – Length – I understand why the meeting was lengthy, but I like the fact our regular meetings are 1.5 hours. – The meeting when went overtime (too much agenda or spent too much time on bylaws) – Fewer reports—we can read these

Board Member Putting together the assessment for board members is done in the same fashion as the full board. You take the duties and guidelines constructed by the board and put them into an assessment format as shown in Table 13.7. What is the point of a board member completing a self-assessment on the duties and guidelines? Won’t the board member see things in the most positive light, as is often the case with self-assessment? To be sure, this is a good point, but in addition to providing valuable feedback especially in the comments section, asking board members to self-assess keeps the duties and guidelines fresh in their minds. Attendance is one of—if not the most critical—measures of effective governance, an attendance assessment should be also used. Table 13.8 is one from an agency focused on developmentally disabled individuals. As the saying goes, a picture is worth a thousand words. What has happened to board members 11, 14, and 15, all whom are functional noshows? What about board member 3, who has only made one meeting in the last four? Though many organizations have three-strikes-and-you’re-out regulations in the bylaws to deal with no-show board members, most don’t take this nuclear option. Having an attendance summary that accompanies the minutes calls the question. I recall a board chair who was troubled about publishing the attendance assessment. She was worried that the board members would see this as a throwback to grade school and that they would be insulted to have their attendance recorded. So the question was taken to the board members for comment. It was eye-opening. The board members wanted the attendance log as a way for their service to be recognized. It was disconcerting to many that board members with poor attendance habits were never called out or any explanation given for the absences. The attendance assessment was extremely valuable to them.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

191

Accountability

TABLE 13.7 Board Member Assessment Board Member Duties: Circle how well you are doing (4 =best) I exercise the duty of care. I prepare. I attend. I participate actively. I ask hard questions. I vote conscientiously. I champion the organization to and from the community. I make a generous personal contribution. I actively participated in fund raising. I shared my expertise. I do the work of the board including serving on committees and attending events. I support my fellow board members. I hold my fellow board members accountable.

1 1 1 1 1 1

2 2 2 2 2 2

3 3 3 3 3 3

4 4 4 4 4 4

1 1 1

2 2 2

3 3 3

4 4 4

1 1

2 2

3 3

4 4

1

2

3

4

1

2

3

4

1

2

3

4

1 1

2 2

3 3

4 4

Board Member Guidelines: Circle how well you are doing (4 =best) I exercise the duty of loyalty. I disclose any potential conflicts of interest. I speak with one voice including majority decisions not personally supported. I exercise the duty of obedience. I stay true to the mission. I keep confidences. I follow through on my commitments. Comments What can be done to help you do your best as a board member? What do you like about being a board member? What do you not like about being a board member?

Executive Director Executive director assessment is a bit tricky. The executive director’s two duties—deliver what gets done today and enable the board—are not particularly nuanced, but guidelines should be specific enough to require more than a cursory look. The solution is to include both duties, but only those guidelines related to governance as was done in Table 13.9. Following are the comments from an organization that asked what one thing the executive director should change about working with the board and board members.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

192

Governance

TABLE 13.8 Board Member Attendance Board Member 1

Feb √ ×

2

Apr √ √ √

3 4 5

√

√

√

√

Jun × √ × × √ ×

6 7 √

8 9 10

√

× √

× √

√

√

√

×

√

Aug √ √

Oct √ ×

× √

× √

√

√

× √ √ × √

√ √ √ √ ×

×

× √

× √

×

×

×

×

× √

×

×

×

×

× √

× √

% Present 73 √ = Present, × = Absent

73

31

60

60

11 12

√

13 14 15

Accountability ■ ■

To be more focused on the financial state of the organization. Better accounting of $ and fundraisers.

Climate ■

There seems to be a group “friendly” to the executive director and a group that isn’t so sure about his leadership. I’d hope that both groups could remain informed and participate in decisions.

Governance ■

Agenda should be set by executive committee and carried out by board.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

193

Accountability

TABLE 13.9 Executive Director Assessment Executive Director Duties: Circle how the ED has done recently to accomplish the duties (4 =best) Deliver what gets done today Enable the board

1 1

2 2

3 3

4 4

Executive Director Guidelines: Circle how the ED has done recently to respect the guidelines (4 =best) Provide information to the board, committees, officers, or board members in a timely manner that could have a significant impact on the company or in any way cause embarrassment. Send information in advance of board meetings by at least one week. Help the board in its implementation of the Results Now master plan. Not burden the board with insignificant issues that divert focus. Inform the board if it is burdening the staff with insignificant issues that divert focus. Foster a relationship with the board based upon trust and respect.

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

Comments What should our executive director discuss at the next board meeting? What do you like about the way our executive director works with the board and/or board members? What do you not like about the way our executive director works with the board and/or board members?

Openness ■ ■ ■ ■ ■ ■ ■ ■ ■

More open and truthful—no surprises. Closer communication with committees. Communication. Improved communication and honesty. More reporting on what he is doing to alleviate current crisis. Keep everyone informed of problems. Make information more readily available. More honest; don’t sugarcoat, be forthright. Tell us the truth.

Leadership ■ ■

More organization. He is frequently not prepared for board meetings, often distributing data for discussion without sharing with the presenter in advance of the meeting.

Chapter = c13

Date: Dec 8, 2010

Time: 1:11 pm

194

Governance

■

Take stronger verbal ownership of the agency in board meetings— bigger position. He needs to exert more leadership in the direction of the organization. He needs to own the “process” and handle more of the details. The board is there to help with policy and strategy. I feel he is effective given the challenges. He answers questions or will get the answer. Board is still somewhat inbred, but he is slowly changing this. Need more board members with scouting background that truly care To challenge the board more about unrealistic expectations the board might have and suggest alternative approaches based on his training.

■

■

■ ■ ■

Socializing ■

More opportunities for board members to network.

Clearly, this executive director has important feedback to consider especially around openness and leadership. It might make some executive directors uncomfortable to ask an open-ended question like what he or she can do better, but isn’t it better to have the information in advance as opposed to hearing about it at the annual performance review or even worse at an exit interview? It is always up to the recipient of feedback to decide what to do with it, but not having the feedback denies the recipient the opportunity to change. This goes in both directions. Because it is the duty of the executive director to enable the board, he or she must also be forthright in feedback. The big question about assessments—attendance and governance—is whether they are worth the time and effort. Preliminary pre- and post-testing is encouraging. One agency I recently evaluated boosted its average attendance from 54 percent to 85 percent over three years. The same agency retested the survey in Table 12.1 and improved all 25 statements on average by 29 percent; 18 of them were statistically significant. Although assessment is extremely valuable in ensuring accountability, it should always be placed in the context of the agency. As Stephen Covey, Roger Merrill, and Rebecca Merrill eloquently explain: Because of its value, some people have call feedback “the breakfast of champions.” But it isn’t the breakfast; it’s the lunch. Vision is the breakfast. Self-correction is the dinner. Without vision, we have no context for feedback; we’re just responding to what someone else values or wants. . . . But with a clear sense of vision and mission, we can use feedback to help us achieve a greater integrity.7

Chapter = c14

Date: Dec 8, 2010

Time: 10:4 am

CHAPTER

14

Smart Board I always wanted to be somebody, but I should have been more specific. —Lily Tomlin

M

any boards suffer from the LYBATD syndrome, which is characterized by “board members’ singular or collective inability to apply their education, training, professional skill set, and/or the requisite intellectual rigor to nonprofit board deliberations, decision making, and governance.”1 Put simply, leave your brains at the door (LYBATD) when you join a board. Of course, board members don’t really leave their brains at the door, but they appear this way to executive directors who are oblivious to the seven realities. The executive director is very knowledgeable about the agency and thus assumes the board members are, too. With passion for the cause, many executive directors cannot imagine any excuse for LYBATD syndrome other than that the board members don’t care. Although there are many tonics for the LYBATD syndrome including Peggy Jackson’s likeable mix of better recruitment, orientation, and evaluation,2 the place to begin is making it easier for board members to be smart. Governance pundits often describe the board as a herd of cats where everyone has their own point of view. But this animal metaphor is off the mark completely. Because time is the key variable, board members are more like tortoises than cats. Time moves very slowly for the average member—12 hours a year or so around the table, every other month or so. Contrast this with the executive director who is on hummingbird time and you get the picture. Compounding confusion is that most board members aren’t monogamous about their volunteering; the good ones often serve on multiple boards and epitomize the 1970s rock anthem from Crosby, Stills, Nash, and Young,

195

Chapter = c14

Date: Dec 8, 2010

196

Time: 10:4 am

Governance

“Love the One You’re With.” I remember interviewing a board member a few years ago who was the publisher of a regional newspaper. She was much sought after not only for her position of influence, but because of her connection to a national foundation. When she said she was on nine different boards, I asked her which ones, and she was only able to recall five off the top of her head. Do we honestly think that every board member remembers what the agency’s mission is? Or what its lines of business are? Or has read the board meeting advance information? Or remembers the name of the other board member sitting across the table? Surely we know this somewhere in the back of our minds, but many executive directors persist in their Rod “show me the money” Tidwell behavior. Executive directors need to accept the seven realities and not fight them, but work with them. Don’t assume that board members know what the executive director knows; assume that they don’t know. And this begins by seeing each of them as Jerry “help me help you” Maguire and not as Rod Tidwell.

Help Me Help You Imagine a board member that serves on multiple boards and who is passionate about her commitment to the agency. Yet she must balance her time carefully including her day job and her family, including her aging parents and teenage children. The executive director of the agency sends a big manila envelope to her about a week in advance of the upcoming board meeting. It is chockablock with important information including the minutes, financial reports, and the like. Some of the reports are on regular-sized paper, others are legal size; some are printed on both sides, some not; some stapled, others loose-leaf, some reasonable font size, some bifocal small. And so it goes. Her duty is to carefully prepare for the meeting, but first she must somehow put all that information into some order that makes sense. And this is if she’s lucky. Unlucky is the board member who has been sent the information by email and doesn’t have toner or paper for the printer or didn’t check email in the first place. Most board members are expected to make sense of all of the information by using their trusty three-ring binders. At the orientation session that most, but not all board members attend, they are presented with a binder usually complete with information about the organization, the bylaws, contract information, agendas, and the like. The idea is that board members will study the information carefully before each meeting including any documents sent in advance, file the new information in the proper place in the binder, and bring their three-inch binders to the board meetings.

Chapter = c14

Date: Dec 8, 2010

Smart Board

Time: 10:4 am

197

What really happens is that most board members don’t bring their binders to the meeting and instead scramble for the extra copies, which then requires someone to make a trip to the copier for more. Those that did bring their binders often click them open and shut throughout the meeting as they do their filing. As Susan Powter said in her fitness-guru days back in the 1990s, “Stop the insanity.” But how? Start by assuming that board members generally have to refresh their memories about the agency before each and every meeting. And that they don’t have the luxury of time on their side. And that they don’t know the agency as well as the executive director. And that rule one is keep it short and sweet. How do you accomplish this? Make the Results Now master plan the centerpiece of your board meeting advance information packet. Add a table of contents, meeting agenda, executive director summary to the front end. Add an appendix to the back that includes minutes, motions, miscellaneous, and contact information. Why contact information? Because it changes all the time and by updating it regularly, board members get smarter. On the very last pages of your packet, put the blank assessments that board members will fill out at the meeting. If you’ve followed the keep-it-short-and-sweet rule, you might have 20 to 30 pages give or take. Of particular value is the executive director summary. Like so many Results Now elements, less is more especially for the busy board member. Thus, the best summaries condense the major points of interest into a very readable summary, usually no more than two pages. Executive director summaries contain not only negative information; good news is just as welcome. The executive director summary is essentially an annual report outlining notable ups and downs. The executive director typically writes it, and it can be an opportunity to celebrate success and acknowledge failure or concerns. The executive director summary gives the reader with limited time a first look at what’s going on at the agency. The executive director summary stimulates thinking by identifying those major topics about which the reader should be most concerned. The chief concern about providing an executive director summary is that it may be the only part of the advance information that the board member reads. If that is the case, the executive director summary will have proved its worth by alerting the reader to matters of greatest importance. There are just two sections in the executive director summary. First is the overview, which gives a quick glimpse of three or four paragraphs in length often focused on the mission. Here, for example, are the first two paragraphs from the Overview section of a chapter of Big Brothers–Big Sisters: Big Brothers–Big Sisters finds itself at a crossroads. On one hand, the organization is enjoying a period of outstanding financial results and

Chapter = c14

Date: Dec 8, 2010

Time: 10:4 am

198

Governance

dramatic growth within some lines of business that together have achieved an operating margin of nearly 7 percent, up over 80 percent from last year. On the other hand, Average Total Matches has declined 13 percent during the same period to 234. The focus for the next two years is on tackling goals that will achieve the result of increasing core matches. At the same time, the organization is working to improve various business processes in order to secure more core matches. The second section is about the lines of business and discusses notable issues. Some organizations will also add important information related to the general operations or departments. Remember that one of the chief complaints of board members is too much information, so be careful to include only important things. Here is an abbreviated executive summary from the Victoria Theatre Association: Overview The theme for the Results Now Master Plan for two years ago was “get set.” The theme for last year was “get ready” and this year’s focus was “go.” For next year, the theme is “grow strong.” The organization has combined revenues under management of $19.7 million this year and we are all working diligently to improve infrastructure and reduce costs. Of particular interest is that the audit just completed shows a modest surplus of $9,000 for the fiscal year just ended—an extraordinary accomplishment given doubling of the scale of operations, war, soft economy, and a new building to run. For the current year, the organization is projecting revenues under management of $21.3 million with a deficit of $80,000, which is solid improvement against the planned deficit of $145,000. Series revenues have exceeded expectations and had it not been for unforeseen management fee reductions of $180,000 net by the community foundation, the financial position of the organization would be solidly in the black. Next year is on track to achieve a balanced budget. Lines of Business In the Facilities Department, the Events Services line of business is enjoying continuing success. Sales for this year will reach over $2 million with net revenues of $35,000. Catering events for the last 45 days of this calendar year will yield total sales of over $350,000. The strong pace of growth of the Call Center line of business has continued and fee revenue will make goal at $380,000. Of note, on-line

Chapter = c14

Date: Dec 8, 2010

Smart Board

Time: 10:4 am

199

sales have been very successful, and moved 34 percent of the inventory. Unfortunately, we experienced real difficulties in answering calls in a timely manner early in the fiscal year, but things have improved in recent months. In the Parking Services line of business, the garage is now open for monthly, transit, and event parking. Monthly parking reached capacity on September 1 and gross sales for this calendar year will achieve $971,000 and grow to $1.65 million next year. In the development lines of business, fundraising will achieve its $1.87 million against a goal of $1.73 million in spite of a partial loss of government funding. Next year is expected to see significant improvement. The programming lines of business in general will slightly exceed their goals for attendance and gross sales. Some lines of business are struggling; however, increases in single projections have left overall activity and income either improved or relatively unchanged. For the coming year, subscriptions are projected to reach 13,300, down from 14,700 this year. This is a substantial reduction, but combined with another year of strong single ticket sales we expect total income to be down by about 3 percent. We must keep a watchful eye on this area as it is the engine that drives our revenue. When you wrap everything together, you have board meeting advance information that is stand-alone in texture. There is no need for a three-ring binder, no need to collate and file. Simply toss the packet into a briefcase and you’re good to go. Appendix D contains a complete template for how this can be arranged.

Adding Value The corporate solicitation had come to a close, the memento of thanks presented, and the proposal for the coming year had been discussed. The president of the corporation obviously enjoyed his affiliation as a funder and a board member. His busy schedule of travel had not stood in his way as an active board member and he had missed just one of the last five board meetings. “Bob,” he said to the executive director, “I want to do more. I want to be more active on this board, really make a difference, and really add value.” Bob couldn’t believe his luck: a generous corporate leader and board member willing to do more! “We could certainly use leadership on the performance assurance committee to figure out how to invest our growing endowment,” Bob replied, “and someone like you could make a magnificent

Chapter = c14

Date: Dec 8, 2010

200

Time: 10:4 am

Governance

contribution as a leader of our planned giving initiatives to build our endowment.” The corporate president thought for a moment and answered, “Finances have never been of much interest to me and I don’t like asking other people for money. Isn’t there something else more interesting that I could do?” That board members want to make a difference and add value to an organization goes without challenge. Most board members sincerely want to help, to make a difference in the organizations that they serve. Nonetheless, boards are not meant to provide entertainment for their members. The board is a means to an end, in this case the achievement of a chosen destiny, the accomplishment of the mission. If there is a job that the board member can do that adds value, by all means it should be done. Yet making work for the purpose of keeping the board member interested wastes precious resources. As elementary as it may seem, 80 percent of what it means to be a good board comes from not being a bad board. The lion’s share of being positive is not being negative. Doing no harm seems somehow too simple, too basic to be of value, but it is tremendously significant. Instead of asking itself how it can do better, good boards often ask what they could do to stop being unproductive.

Boards How do boards add the most value to the organization? Aside from accomplishing the duties and respecting the guidelines, boards are at their best on the big-ticket items. The mother of all of these is executive director selection. Next would be the work done on the strategic plan, especially with regard to the selection of new strategies. Much has been written about how boards add value. Thomas Holland and Myra Blackmon identify four ways: Support the Chief Executive [by] helping the chief executive determine what matters most. . . . Not every matter is equally important and not all issues can be addressed, so relative priorities must be set. Serve as a Sounding Board [to] create opportunities for the chief executive to think aloud about questions and concerns well before it is necessary to come to conclusions or make recommendations . . . A board must encourage candid discussion of embryonic ideas, ambiguous issues, and unclear challenges in the road ahead. Encourage and Reward Experimentation . . . encourage experimentation, trying out new approaches and alternative ways of dealing with issues. . . . Raising critical questions and challenging assumptions stimulate new ideas and creative alternatives for the future of the organization.

Chapter = c14

Date: Dec 8, 2010

Smart Board

Time: 10:4 am

201

Model Effective Behavior . . . Boards that call for accountability of staff have far greater credibility if they show by example how that is to be done.3 With all this said, governance is not an end unto itself; it is a means to an end. The proof of a great board is in the accomplishments of the organization it governs, not in how effective it is with recruitment and orientation of board members, the degree of satisfaction with meetings, or how pleased the executive director is with the board relationship. These are means to an end, not an end itself. Taken to its logical conclusion for a nonprofit organization, as Cyril Houle asserts, “A board must ultimately be judged not by how it follows procedural rules, but by how effectively it achieves the mission of its institution.”4

Board Members Woody Allen once said, “Eighty percent of success is showing up.”5 And that is most certainly true when it comes to how board members add value. Simply following through on commitments made delivers great benefit to the overextended executive director. Unfortunately, in looking for home runs, board members frequently miss the chance to hit the single that wins the game. The value of a promptly paid pledge pays big dividends to the fund-raising staff; an unsolicited invitation to lunch for the executive director “Just to see how you’re doing” can deliver remarkable results in terms of building self-confidence. If boards are best on the big-ticket things, board members are at their best one-to-one. Sometimes a few words that may seem small to a veteran corporate leader are career building to the inexperienced executive director. Ask executive directors for a specific moment of extraordinary value from a board member and it will often have a very personal texture to it. The executive director recalls the 30 yellow roses delivered one a day over a month to his terminally ill wife. Another executive director remembers the celebration of her twentieth anniversary complete with commendations from the governor. Most executives would answer the question of how board members add the most value in very specific terms: “Raise more money.” Being ready and willing to assist the executive director with the ongoing activities to raise the necessary funds for operations is a critical need. Other executive directors remember those board members who asked tough questions as some of the best at adding value. A single board member who participates actively in decision making can make an immense difference an organization. Take the Victoria Theatre Association, for example. Julie had always expressed concern to me that she talked too much at board meetings. She had come on the board during a substantial period of

Chapter = c14

202

Date: Dec 8, 2010

Time: 10:4 am

Governance

growth and she asked regularly what the company was doing to be a good community citizen. Her vision was that the organization could do more to lend a hand to those nonprofits less fortunate. Time and time again, I reassured Julie that her voice was important and that I wished there were 10 other board members that provided the stimulation in board meetings that she did. Over the years as a board member, Julie continued her tough questioning, and slowly other board members began to echo her. Could the company do more to be a community leader? To be sure, because Julie had kept the issue in front of the board in a positive way, we were all more open to the possibilities. The rest is history: The first opportunity for helping came when the board president of the Human Race Company asked for help. Ten months later, the curtain rose on the Next Stage Series. This ushered in a new period of dynamic activity that was a direct result of one board member asking tough questions over a period of years about how we could do more. I also recall having a 20-minute conversation with the president of a large corporation and who was a board member wherein he was advised to keep his altitude at 40,000 feet when beginning the discussions for the joint program. “The details are less important now than the vision,” the president remarked. This one moment of guidance delivered incredible value to the organization. While the board member would not see this as making a major difference, I most respectfully disagree. If mentoring the executive director or providing encouragement delivers such great value, why isn’t it a duty of the board member? In some boards, it is, but in general boards try to stay away from mandating this a duty because of the potential for abuse on the part of the board member. If the executive director asks for advice from the board member, there is no issue with giving it. Unsolicited advice, however, can pass for instruction. Being responsive to the executive director who asks for advice is common courtesy and should not breach the chain of command. Because the line is so thin between advice and instruction, however, many boards are loath to prescribe that the board member actively give unsolicited advice. It is often difficult to fulfill the duty of asking tough questions if the board member is also enjoined to be a cheerleader of the executive director. Many times the two are mutually exclusive. Although a strong case has been made for the importance of the executive director fulfilling his or her duty to enable to board, the board member must take a fair share of accountability for his or her duty to follow through on commitments including honoring the duties and guidelines. Board members gain a lot from being on the board as Alice Korngold observes, “Nonprofit board service is the ultimate experience in ethics, accountability, leadership, group dynamics, and crisis management and communications.”6 They should return the favor by being diligent in their

Chapter = c14

Date: Dec 8, 2010

Smart Board

Time: 10:4 am

203

efforts provided that the executive director does his or her job to enable their success. Finally, one of the best ways for a board member to add value is to know when he or she is not a fit for the agency. There are two primary considerations according says Alice Korngold, First, find an organization that resonates with you. The second factor is critical but usually ignored: It is paramount to join a board where you can add value to advance the nonprofit.7 In other words, if the mission doesn’t resonate and/or you can’t add value, don’t join that board. If you’re a turnaround artist, don’t go on a board that is operating effectively. Thinking that you’ll be the one to “first break all the rules,”8 carefully consider whether it would be better for you to break them somewhere else. And if you have a thirst to be an executive coach to the executive director, perhaps it would be best to quench it elsewhere. The point is to join a board where you care about the cause and definitely can add value. In other words, find the nonprofit that fits you, not a nonprofit that you can make fit.

Executive Director Executive directors are significant participants in the process of adding value. Very early in my career, I was pulled aside by a well-respected (and quite seasoned) executive and offered a practical approach to governance. “Treat your board like mushrooms,” the wizened veteran advised. “Keep them in the dark, cover them with plenty of dirt, and chop off their heads as soon as they pop up.” That approach may work well for some period of time until a critical decision has to be ratified and those ill-informed board members make the wrong call. I found this out firsthand some years later when the board I was working for very nearly doomed a project that later grew into one of the most important activities of the company. That I treated the board this way had very nearly led to disastrous results and cost me my job. Many executive directors live in the world of the traditional model of governance where the board decides what, the staff decide how. This is not how the world works. The executive director has a profound role to play in making the board effective. As Robert Herman and Dick Heimovics observe: Our research shows that board members and staff expect executive directors to take responsibility for success and failure and they do take such responsibility. Thus, we argue, the board’s performance becomes the

Chapter = c14

204

Date: Dec 8, 2010

Time: 10:4 am

Governance

executive’s responsibility. We can no longer expect boards, in most cases, to improve their performance independently.9 What actions do executive directors take in the practice of boardcentered leadership? There are just six: 1. 2. 3. 4. 5. 6.

Facilitating interaction in board relationships. Showing consideration and respect toward board members. Envisioning change and innovation for the organization with the board. Providing useful and helpful information to the board. Initiating and maintaining structure for the board. Promoting board accomplishments and productivity.10

To be sure, not everyone believes that the executive director is at the center of board effectiveness. Some see a clear line between the work of the board and that of the staff and never shall the two cross. For example, John Carver says that the board itself must take responsibility for its “development, its own job design, its own discipline, and its own performance. . . . No matter how well the CEO tells the board what to do and when to do it, governance cannot be excellent under these conditions.”11 Others see a clear risk in having the executive director at the center of leadership. Richard Chait, William Ryan, and Barbara Taylor call this leadership governance where the executive director displaces the board and where the “occasion to govern the organization thus becomes merely a chance to counsel management. In the process, the entity granted ultimate power exercises precious little influence.”12 They also see the opposite—governance by fiat where the trustees displace executives—as equally destructive: “Boards would impose their views on executives, an arrangement few executives and trustees would tolerate.”13 Their solution is the better-by-far alternative of what they call Type III governance where “trustees and executives collaborate.”14 Ultimately, the question of who is responsible for effective governance is a conundrum. On the one hand, if the executive director does not provide support, the likelihood is that all but a few boards will be able to rise to the occasion. On the other hand, if the executive director supplies too much support, there is a chance that he or she will turn the board into the “proverbial rubber stamp or a combination rubber stamp and cash cow.”15 You’re damned if you do, damned if you don’t. Robert Herman and Dick Heimovicks recognize this dilemma, but argue that “since chief executives are going to be held responsible and since they accept responsibility . . . they should work to see that boards fulfill their legal, organizational, and public roles.”

Chapter = c14

Date: Dec 8, 2010

Time: 10:4 am

Smart Board

205

To be sure, there are some executive directors who don’t want their boards to be effective. As the late Kenneth Dayton puts it, They say, “I don’t want anyone looking over my shoulder. I don’t want anyone second-guessing me. I don’t want anyone reviewing my performance.” But if they really want to be good, if they really want to grow, if they really want to build that institution into a dynamic factor in society, then they will soon discover that they can do it so much more effectively if they have a dynamic, effective board.16 To stand aside and expect the board to be effective without the help of the executive director is utter folly. That’s why for the executive director who asks “‘What good is the board?’ comes the reply that he or she alone is largely responsible for the answer.”17 In other words, if you don’t like your board, look in the mirror for the reason why.

Imagine That What does it mean to be a high-performing governance team? Governance expert Thomas Holland says it is a team “ready, willing, and able to focus on the main thing—a team that isn’t hobbled by inefficient or unproductive procedures or distracted by trivial issues that will have little impact on your board’s ability to achieve its vision for the organization.”18 But ready, willing, and able to focus on what main thing? Thomas Holland weighs in by saying this is the work of governance, that the “idea is to determine what the big ideas are, to find the whales in the pool and not be distracted by the paramecia, to ask yourself what is of such overwhelming import that it requires the board’s attention for the foreseeable future.”19 Now that’s a smart board, a board that asks the hard questions. And that’s what Results Now does. Its focus is on answering the five essential questions, not on dictating the answers: ■ ■ ■ ■ ■

Why? Where to go tomorrow? What gets done today? Who does what? When did it happen?

One way to fix problems within an organization is to yell at the people who you think caused them. Someone puts the letter in the wrong envelope or forgets to turn out the lights when leaving. Yelling can produce meaningful short-term results, but it fades quickly and hardens people. Like the great

Chapter = c14

206

Date: Dec 8, 2010

Time: 10:4 am

Governance

W. Edwards Deming said, “Workers are responsible for only 15 percent of the problems, the system for the other 85 percent.”20 The members of the governance team—board members and key staff—are part of the system, too. They’re the means to an end of making the chosen destiny come true for the organization that they govern. The chosen destiny must always include accomplishing the purpose of the agency as much and as effectively as possible. Too bad many nonprofits aren’t clear about that. So what? Just imagine walking into a completely dark building for the first time, being taken to a spot on a manufacturing line you have never seen, given tools you’ve never held, and then being told to get to work making something you have never seen before. Imagine being a new board member walking into his or her first meeting. Results Now turns on the lights in that dark building and provides tools you need in order to get the job done, to make the purpose come true. Now imagine being a new member of the governance team. Imagine being part of something special: an organization bringing its purpose to life. Margaret Mead once said in a now ubiquitous quote: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”21 You know what to do now? It’s time to get to work and deliver the results now! Imagine that!

Chapter = Appendix A

Date: Dec 6, 2010

Time: 4:55 pm

APPENDIX

A

BAM

A

brainstorming, affinity grouping, and multivoting rating process (BAM) begins with brainstorming, which is a technique used to generate as many ideas as possible. There are five official steps to structured brainstorming: 1. The central brainstorming question is stated, agreed on, and written down for everyone to see. 2. Each team member in turn gives an idea. No idea is criticized. Ever! 3. As ideas are generated, write each one in large, visible letters on a flipchart or other writing surface [like Post-it® notes]. 4. Ideas are generated in turn until each person passes, indicating that the ideas (or members) are exhausted. 5. Review the written list of ideas for clarity and to discard any duplicates.1

The wonderful thing about brainstorming is that it allows everyone to have a voice in the process, but no one can dominate it. The quiet members who never speak up finally have a chance to offer input because they are directly asked to do so; the overbearing members finally get a chance to listen albeit this is not necessarily of their choosing. To be sure, facilitating a brainstorming session takes practice, but most executive directors can become quite good at leading brainstorming sessions rather quickly. That said, bringing in a facilitator, or training someone in-house to handle the process, can be a good idea so that the executive director and senior staff can participate actively. Here, for example, is a short list of 20 ideas from a question about board member duties answered by seven people: advocate, ask questions, attend, attend events, be active, be ambassadors, be educated, contacts and resources, dedicated, do the work of the board, get money, give money, good representatives, make good decisions,

207

Chapter = Appendix A

Date: Dec 6, 2010

Time: 4:55 pm

208

Appendix A

TABLE A.1 Affinity-Grouping Ideas Ideas

Results

– Contacts and resources, get money – Advocate, be ambassadors, promote, good representatives – Recruit others, sit on subcommittees, do the work of the board – Prepare, be educated, dedicated, ask questions, make good decisions, attend, provide tech expertise, be active, participate, give money, attend events

Raise money. Champion the organization. Do the board’s work. Make good decisions.

participate, prepare, promote, provide tech expertise, recruit others, sit on subcommittees When I do brainstorming, I like to go around the table at least twice and stop when the ideas get saturated, which occurs when you start hearing lots of synonyms for things already up on the board, literal repeats, and passes, that is, when the members are exhausted. Keep in mind that for a group of 15 people, you might end up with 40 to 50 ideas, a full board of ideas. With this many ideas, you need some way to manage them. A technique called affinity grouping is used to arrange the answers into common themes that become the final board member duties. Here are the steps: 1. Pick an idea. 2. Group it with other related ideas. 3. Name the group if necessary. When using this technique, invite the participants to help sort the ideas, but the facilitator should retain control. That’s because this is a game of horseshoes, where getting close is good enough, but being too far away is bad. In other words, you don’t want to end up having just one or two groupings when 10 are actually present. Building an affinity diagram can be done quickly, but you want to practice this one before going before a group; you have to be able to see the trees for the forest. Looking at the small group of ideas from above, start with one that seems like a root idea; take advocate, for example. There are three other ideas that belong: be ambassadors, promote, good representatives. Table A.1 shows the results. The final step in the BAM process is multivoting to prioritize or rate the final ideas. The easiest tool is weighted multivoting that I like to call “Take

Chapter = Appendix A

Date: Dec 6, 2010

Time: 4:55 pm

209

Appendix A

TABLE A.2 Multivoting Ideas Ideas

Results

– Prepare, be educated, dedicated, ask questions, make good decisions, attend, provide tech expertise, be active, participate, give money, attend events – Contacts and resources, get money – Be ambassadors, promote, good representatives, advocate – Recruit others, sit on subcommittees, do the work of the board

Make good decisions (21).

Raise money (13). Champion the organization (8). Do the board’s work (0).

it to Vegas,” where a blue dot equals $3, a red dot equals $2, and a green dot equals $1. Each person gets one dot of each color to distribute on any grouping of ideas. They can put all their dots on one grouping or spread the dots around. Adding up the money yields a strong sense of priority, as shown in Table A.2. In the case of the last grouping that earned no points, you’d have a choice of whether to keep it in the mix. Remember that prioritization does not necessarily require discarding groupings; it’s simply a method for establishing importance. Indeed, perhaps less important than what is at the top of the list is what ends up at the bottom. Multivoting is a good way to winnow out the things that you’re not going to pursue further. A word of caution: not every BAM process requires the multivoting step. Sometimes the consensus of the group is so strong, it is not necessary. This is also true when time is at a premium or when prioritization is not necessary. The supplies you’ll need for a BAM process include three lightweight aluminum telescoping display easels, four packages (three boards per package) of 30 × 40 foam boards, magic markers, a role of clear packing tape, and 10 packages of 5 × 8 Post-it® notes. You should also get black magic markers and sticky dots in blue, red, and green colors. Assemble the foam boards into six bigger 60 × 80 boards by taping the adjoining seams on both sides. Leave two boards blank and load the four other boards with Post-it notes in vertical columns, seven notes to a column with seven columns to a board. Put the two blank boards abutting each other spanned across the four easels. Place the four loaded boards one behind the other in the middle of the two blank boards, which leaves one-half of each blank board on each end. Arrange the participants around a table set up in an open U shape with an equal number of comfortable chairs on the three outside sides. Put the easels at the head of the open U. You’re now ready to go!

Chapter = Appendix A

Date: Dec 6, 2010

Time: 4:55 pm

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

APPENDIX

B

First Cut

F

irst Cut is where you take a relatively shallow dive to see whether it makes sense to move a potential strategy to Final Answers, where you go for a deeper dive. The First Cut is a vetting process to reduce the volume of strategies to a smaller number, perhaps moving down to one or two.

Strategies The First Cut begins with a detailed description of the strategy or strategies you are investigating. Your description begins with the people you intend to serve, the product to be delivered, the place of delivery, and the price. This alliteration around the letter P is meant to evoke, but not duplicate exactly, the marketing mix introduced by Neil Borden in 1964,1 and later grouped into four categories of product, price, place, and promotion by Jerome McCarthy, which are commonly known today as the 4 Ps of marketing.2

People The description of your strategy begins with describing the people who will benefit from the strategy once implemented. Many experts like Kristin Majeska call this customer segmentation, which she defines as “the identification of groups of customers with common needs, behaviors, and demographic characteristics that can help you target specific groups and tailor your offerings to them.”3 So if your idea is to improve client outcomes by 20 percent, you would first describe the client as explicitly as possible. Let’s say your clients are juvenile girls at risk of pregnancy: Juvenile girls at risk of pregnancy and living in the urban core 211

Chapter = Appendix B

212

Date: Dec 13, 2010

Time: 12:5 pm

Appendix B

As such, you are describing your target market, the segment of the population you intend to affect by executing this strategy. Remember how Peter Drucker describes the customers: The primary customer is the person whose life is changed through your work. Effectiveness requires focus, and that means one response to the question. . . . Supporting customers are volunteers, members, partners, funders, referral sources, employees, and others who must be satisfied.4 The primary customer of any strategy ultimately must be the person whose life is changed. It is perfectly acceptable to have a host of supporting customers, but they are never primary. If your strategy does not have a defensible link to the primary customer, ask yourself why it’s under consideration. Put differently, if you cannot identify a clear link to the primary customer, perhaps you shouldn’t undertake the strategy. In addition to describing the beneficiary of the strategy, describe their characteristics as much as you can. How old are they, where to do they live, what is their income level, how many are there, how many do you serve. Use ready-made resources like census.gov and sba.gov to help you do this. In essence, you are describing your market, which David La Piana defines as market awareness that includes four useful questions: ■

■ ■ ■

What the organization’s market is; whether that market is stable, shrinking, or growing; and who else is in the market Where the organization stands relative to other players in the market How the organization got to its current status relative to others Where the organization wants to go next within the market5

What about operational effectiveness strategies that do not appear to have primary customers that are the beneficiary of your life-changing purpose? Take the strategy of installing your first agency-wide intranet to facilitate enhanced communications. But enhanced communication to what end? If the staff members will be better able to serve the primary customers, you likely have a defensible strategy. Do not waste your time if you cannot draw a defensible link to the primary customer. You don’t build new buildings or boost fund raising simply to make your staff more comfortable and well compensated unless it has a direct benefit for your primary customers. Does this mean that you don’t implement these kinds of strategies? Not at all; comfortable and well-compensated staff can make a huge difference in serving the primary customer. Just be sure the link to the customer is clear. When our new performing arts center was built, I had the chance to move our offices from very cramped and inefficient offices on three different

Chapter = Appendix B

Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

213

floors that we had occupied for a decade. It was a very tempting proposition. I had abandoned my corner office years before so that three finance staff members could take it over, and I had relocated to a very small space, a closet really. In the new building, there would be room to spare, staff would be happier, and I’d get my office back with a wonderful view to boot. Unfortunately, the build-out of the new space priced out at nearly $750,000 and we would be taking over an office condominium that could be sold for much more and consequently benefit our all-too-small endowment. Over all, the direct link to our primary customers just wasn’t strong enough to justify the expense. I didn’t get my wonderful new space, but I did continue to get the view that mattered most: that of a full house of people in the theatre.

Product Product begins with what difference the strategy will make to the primary customers. For the juvenile girls at risk of pregnancy, the life-changing difference might simply be getting though their juvenile years without becoming pregnant. Just how you intend to do this is your next step in describing the product itself. Is it sex education? Distribution of contraceptives? What about peer mentoring or family counseling? In other words, what product or service will the people you are serving be receiving? In this example, the product is peer-to-peer mentoring: Preventing pregnancy for juvenile girls at risk and living in the urban core through peer-to-peer mentoring

Place Place typically refers to how the customer gains access to the product, be it in person or online. This is sometimes called the distribution channel. Preventing pregnancy for juvenile girls at risk and living in the urban core through peer-to-peer mentoring based at our learning center

Market Once you have the description of the strategy, you dig deeper into the market by addressing price, proposition, and probablities for success.

Chapter = Appendix B

214

Date: Dec 13, 2010

Time: 12:5 pm

Appendix B

Price Not all strategies need address the question of pricing. No one will be charged for using the intranet for better communications for example. Pricing questions usually arise in conjunction with lines of business where there is a direct relationship with the client or through an intermediary. Thinking about price early on and in the description of the strategy is very important, but some relegate this matter to much later. That said, pricing is no trivial issue, and it should be on the table at the earliest point possible and most certainly before you go back out to talk with customers when you can get an early indication of their willingness to pay. As Patricia Caesar and Thomas Baker warn: Never show people the product or describe the service without the price, because that is not the way it is generally going be marketed in the real world. You may be reluctant to do this at an early phase of implementation; nevertheless, pick a number, put it down, and get a reaction. Price is an integral part of how any product or service is positioned in the marketplace, and yours, no matter what it is, cannot be evaluated without one.6 There are many different ways to think about pricing. The most common is the cost-plus method, followed closely by breakeven pricing, but these methods are mostly about what the provider must receive in order to achieve some objective like breaking even. Instead, you should first know what others in your field charge for the same products. If your peer agency charges $225 per camping week in the northern part of the state and regularly reaches 90 percent of capacity, perhaps your price of $435 is too high and explains why your capacity percentage is 55 percent and declining. Regrettably, the typical mistake nonprofits make is not charging too much, but too little or not at all. Nonprofits regularly make the failed assumption that “free of charge” has great meaning. Whenever I see this message trumpeted as an attribute of a program, I wince. As counterintuitive as it may seem, charging nothing for something often conveys a value of nothing at all. After all, most customers are willing to pay something for what you’re offering. How can you justify not charging ones who have the means to pay? How can you pass up the chance to serve more people as a result? It has long been known that paying something for a service is good for both the customer and the provider. At its most basic, charging for services puts skin in the game for both the provider and the customer. The recipient of services is now a bona fide customer purchasing something of value and expecting a certain level of quality. The provider is now subject to the accountability that comes from having paying customers instead of take-itor-leave-it charity cases.

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

Appendix B

215

As such, it could be a viable strategy to simply start charging for something that you have been giving away. You won’t be the first. Many nonprofits are beginning to charge for services that no one would have thought possible even a few years ago. Take the strategy of charging homeless people for space in shelters. What could be more unthinkable: Homeless people are penniless, right? Yet just this spring the City of New York rolled out “an innovative welfare-reform policy that advocates for the homeless are worried will just make matters worse: charging for space in a shelter.”7 This was hardly innovative, however. A homeless shelter in a Midwest rust-belt community has been charging $5 per night for some time now; those that don’t have cash sign IOUs. To be sure, there may be people who cannot pay a thing for what you are providing. I ran a performing arts center that delivered a school-day educational program for 60,000 kids each year. About a third of the children attended free on scholarships that teachers could request. Instead of saying that everyone could attend free of charge, we said that no one would be turned away. This type of pricing allows you to set a fixed price for everyone, but use discounts or give-aways for those who need help. If you are worried about whether this sort of price maximizing will hurt, consider the results from Panera Bread’s nonprofit eateries: Its cashiers tell customers their orders’ “suggested” price based on the menu. About 60 to 70 percent pay in full. . . . About 15 percent leave a little more and another 15 percent pay less, or nothing at all. A handful have left big donations, like $20 for a cup of coffee.8 Here’s what you have so far in terms of describing your strategy: Preventing pregnancy for juvenile girls at risk and living in the urban core through peer-to-peer mentoring based at our learning center for a fee of $2 per session

Proposition The value proposition is at the core of marketing and is defined as “the value of what you get relative to what you give in exchange for it.”10 Put directly, why would your customer write the check? Maybe the answer is that the customer wouldn’t, or would at the right price or with a different product. The value proposition is not about how you will sell this or that service or product, but why the customer would buy it. I talked to a man once who used existing information, talked to potential customers, and practiced the art of observation to construct his value proposition. He told me how he chose the location for his art gallery and

Chapter = Appendix B

Date: Dec 13, 2010

216

Time: 12:5 pm

Appendix B

why his pricing was so reasonable and the art so accessible. He had spent many, many hours walking the neighborhoods where he could have located his gallery. He talked to people who would eventually be his customers, visited proprietors in restaurants and shops, and counted things like the number of people at certain times of the day and evening. He talked to his artist/proprietor friends. He decided where to locate his gallery because of this eye-to-eye research and his pricing reflected the brands of automobiles that he observed. He didn’t have a Ford Focus gallery for sure, but he wasn’t a Rolls Royce either; he called it a Honda Accord “kinda arts-and-crafty place that sells good art at a fair price.” Armed with the information you gained from your research, you are now ready to write the value proposition for your strategy. Like your mission statement, it will be short and to the point: Preventing pregnancy for juvenile girls at risk and living in the urban core through peer-to-peer mentoring based at our learning center for a fee of $2 per session that delivers convenience, confidentiality, companionship, and commitment to their success. The value proposition—why the juvenile girls would write the check—is for the convenience, confidentiality, companionship, and commitment to their success.

Probabilities Researching the probabilities for success does not require an MBA or a high-priced marketing consultant. You can get at this information in a variety of ways, but the easiest is to ask your customers directly. In getting ready for making the vision, you connected with some of your customers to understand what they liked and didn’t like about their experience with your organization’s services, programs, or products. You have now defined your strategy more specifically. It’s time to go back to your customers and understand the probabilities that your strategy will succeed. What this requires, according to Peter Brinckerhoff, is “to start the process of delineating the difference between what you think people want and what you know they want. The only way to know is to ask.”9 But ask what? Start with why you think your customers would buy or use your product or service. You should have a pretty good idea by now. You know, for instance, what life-changing difference you’re supposed to be making for your clients. Maybe how you’re different from your rivals is also part of the rationale. Make a list of all of the reasons you think are important. Prioritize the top three or four. Now ask your customer whether they would use or

Chapter = Appendix B

Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

217

buy your service or product at the price you have tentatively establish and test it out with a half dozen customers. You can also go to sources of information already available at your fingertips on the web and at your local chamber of commerce and other such sources, including census.gov and sba.gov. And you can talk to those best-of-best agencies in your field to find out what they know. You can observe things. Take opening a restaurant, for instance. You don’t launch a restaurant just anywhere. You look for the volume of people who ordinarily will walk by your location, especially at the times of day when you plan to be open. You look at the other businesses nearby and visit with the proprietors about how well they are doing. You are especially interested in whether there are any other restaurants nearby, what they charge, their menus, and quality of the food. And if there are no other restaurants nearby, find out why because this may mean something about your probabilities for success. The point here is that you have to get close enough to your customers to gauge your chances of success. You don’t have to go overboard and spend tons of money to do this. Conversations with a half dozen customers may do it.

Muscle Muscle is about the organization’s ability to execute the strategy under consideration. This consists of three factors. Context is the environment in which the agency operates, capacity has to do with its operational effectiveness, and comparison does a reality check of the agency against the best of the best in its field.

Context Although environmental analysis is often used to predict what might happen and is a systematic hunt for opportunities and threats (the last two letters of a SWOT analysis), Results Now takes the position that it should be used to understand whether the opportunities under consideration are doable within the context that exists for the organization and in keeping with the Old Testament verse that there is a “time for everything, and a season for every activity under Heaven.”11 The classic approach to understanding context is environmental analysis with its three central elements as described by strategic management experts Michael Hitt, Duane Ireland, and Robert Hoskisson: Analysis of the general environment is focused on environmental trends while an analysis of the industry environment is focused on the factors

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

218

Appendix B

and conditions influencing an industry’s profitability potential and an analysis of competitors is focused on predicting competitors’ actions, responses, and intentions.12 In this classic approach, you examine the general environment consisting of “seven environmental segments: demographic, economic, political/legal, sociocultural, technological, global, and physical.”13 Some people advocate a different set called the PEST approach, which covers political, economic, social, and technological segments. After examining the general environment, you move forward to examine the industry environment that is often built around Michael Porter’s five forces model: threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry among existing competitors.14 Sharon Oster, for example, includes six forces in her nonprofit approach that begins with defining your market, describing the industry participants, and then analyzing five factors: relations among existing organizations, entry conditions, competition from substitute products, the demand side of users and donor power, and supply.15 Finally, you analyze your competitors using the following four questions: 1. What drives the competitor, as shown by its future objectives. 2. What the competitor is doing and can do, as revealed by its current strategy. 3. What the competitor believes about the industry as evidenced by its assumptions. 4. What the competitor’s capabilities are, as shown by its strengths and weaknesses.16 How do you use this information—general, industry, and competitor analyses—once you have it? Though the common objective of external environmental analysis is to identify threats and opportunities,17 you can use it to make a qualitative case for how well each of your strategies fit with the external environment, as shown in Table B.1. TABLE B.1 External Analysis Matrix Fit to the External Environment General Strategy 1 Strategy 2 Strategy 3

Industry

Competitor

Chapter = Appendix B

Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

219

Capacity When you get right down to it, “organizational capacity is the ability of an organization to operate its business,” says the Nonprofit Finance Fund’s Clara Miller.18 If context is about what is happening outside the agency, capacity is about the inside. There are three useful ways to think about capacity: internal analysis, the iron triangle, and comparison with the best of best in your field.

INTERNAL ANALYSIS The classic method for understanding capacity has four elements that you examine in sequential order as described by Hitt, Ireland, and Hoskisson, “Resources are bundled to create organization capabilities. In turn, capabilities are the source of a firm’s core competencies, which are the basis of competitive advantages.”19 Once you examine your resources, capabilities, core competencies, and competitive advantages, you have an appreciation for what you’re good at and what you’re not. Typically, you want to play to your strengths and minimize your weaknesses. You begin by inventorying your resources, including tangible financial, organizational, physical, and technological resources and intangible human, innovation, and reputational resources. You move forward to identify capabilities that often occur in the functional areas of an organization like distribution, human resources, management information systems, marketing, management, manufacturing, and research and development. Once done, you are ready to identify core competencies, which are “the activities that the company performs especially well compared with competitors and through which the firm adds unique value to its goods or services over a long period of time.”20 Core competencies are tested against four criteria: ■

■ ■

■

Valuable capabilities allow the firm to exploit opportunities or neutralize threat in the external environment. Rare capabilities are capabilities that few, if any, competitors possess. Costly to imitate capabilities are capabilities that other firms cannot easily develop. Nonsubstitutable capabilities are capabilities that do not have strategic equivalents.21

Core competencies that pass the tests are often the sources of competitive advantages. If you happen to have core competencies that pass these tests, count yourself lucky and do all you can to align your strategies to them. Once you have identified your core competencies, you make a qualitative case for how well each of your strategies fit with core competencies as shown in Table B.2.

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

220

Appendix B

TABLE B.2 Core Competencies Matrix Fit to Core Competencies Competency 1

Competency 2

Competency 3

Strategy 1 Strategy 2 Strategy 3

The danger with the classic approach is that the competencies you have now may not be the ones that you need in the future. If that is the case, you may have a possible new strategy to develop those needed competencies. Be forewarned—a strategy to build a core competency is no walk in the park and can be of a scale equal to other major endeavors simply because it often involves changing the culture of the agency. The Victoria Theatre Association’s core competency of making the customer the star took years of discipline. But, once established, it made an enormous difference in the organization’s success.

THE IRON TRIANGLE The iron triangle is a phrase coined by Clara Miller at the Nonprofit Finance Fund and can be used to assess organizational capacity. The iron triangle describes “a fixed relationship between those three elements (programs, capital structure, and organizational capacity), with any change in one inevitably having an impact, planned or unplanned, on the others.”22

Mission and Programs According to Clara Miller, an “organization’s mission is usually comparable with a significantly larger range of programs than it has the resources to pursue.”23 As such, an excellent way to gauge the health of mission and programs is to examine the degree of diversification in your lines of business. On the low side of the diversification spectrum is the single line of business that delivers 95 percent of revenues.24 The single business nonprofit might be an agency that serves hot meals to the homeless in a single facility or a ballet company that only does classic ballets in the local performing arts center. Single lines of business organizations are typically highly mission centered. In the middle of the diversification spectrum are related constrained lines of business where less than 70 percent of revenue comes from one source and all of the businesses are tightly linked. A ballet company presents classic ballets like Swan Lake, operates a ballet school, and tours regionally to high schools; the agency for the homeless serves hot meals, provides space for recreation during the day, and makes referrals to overnight shelters. Because

Chapter = Appendix B

Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

221

of the common link, organizations in the middle of the diversification continuum are also mission centered. At the far end of the continuum is unrelated diversification, where less than 70 percent of revenue comes from a single business, but there are no common links. An example of this is the ballet company that presents classic ballets, rents its studios out for weddings, and sells bookkeeping services to neighborhood small businesses; the agency for the homeless serves hot meals, sells used sporting goods, and provides a linen service to local boutique hotels. All of these lines of business make use of excess capacity, but they are not related to each other except by the common bond of providing revenue. Obviously, unrelated diversification is not seen as especially mission centered. The healthiest place to be on the continuum is in the middle. In other words, you’re in a riskier position by having a single line of business or multiple unrelated lines of business. An argument can be made that as long as all of the lines of business are tightly linked, the number of businesses doesn’t particularly matter. That is true in general, provided the organizational capacity is in place to handle the load, but at some point, too many businesses are truly just that. The bottom line when it comes to degree of diversification is that you should be more risk tolerant if you’re running a single line of business agency and less risk tolerant if you have a lot of unrelated diversification. Moving toward the mission-centered diversification is suggested by either situation. That said, the ability to succeed with new strategies when you have many unrelated businesses is much more likely to result in problems than if you have a single business. In the end, the question is not whether you have too few or too many businesses; the question is always whether your intended strategy is mission centered. Degree of diversification is affected by a variety of things. Funders typically support new programs as opposed to ongoing ones or general operating support, which stimulates the demand for diversification. Many board members from the for-profit sector celebrate diversification because it is a popular tactic for growth. Indeed, it is the rare nonprofit executive who has not heard the ubiquitous axiom of “grow or die.” Grow or die is synonymous with scaling up or going to scale, which “means creating new service sites in other geographic locations that operate under a common name, use common approaches, and are either branches of the same parent organization or very closely tied affiliates.”25 That going to scale is a hot topic these days is not in dispute, and the implications are clear: Go to scale and become high impact.26 But don’t be seduced by the allure of going to scale, of grow or die. Keep Michael Porter’s warning in mind that among “all other influences, the desire to grow has perhaps the most perverse effect on strategy. . . . Too

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

222

Appendix B

often, efforts to grow blur uniqueness, create compromises, reduce fit, and ultimately undermine competitive advantage.”27

Organizational Capacity

Organizational capacity, according to Clara Miller, is “the short-hand term used for the sum of the resources an organization has at its disposal and the way in which they are organized—development skills, marketing skills, financial management skills, program delivery mechanisms, staff, etc.”28 In essence, can you deliver on the promises you’ve made? There are a variety of methods to analyze organizational capacity including reviewing topics you’ve already considered like risk orientation and degree of diversification. You could also consider readily available tools like Venture Philanthropy Partners Capacity Assessment Grid developed by McKinsey and Company that examines the capacity categories shown in Table B.3.

TABLE B.3 Capacity Assessment Grid Categories Aspirations Mission Vision—clarity Vision—boldness Overarching goals Organizational skills Performance management Planning Fund raising and revenue generation External relationship building and management Other organizational skills Systems and infrastructure Systems Infrastructure Organizational structure Board governance Organizational design Interfunctional coordination Individual job design

Culture Performance as shared value Other shared beliefs and values Shared references and practices Strategy Overall strategy Goals/performance targets Program relevance, and integration Program growth and replication New program development Funding model Human resources Staffing levels Board—composition and commitment Board—involvement and support CEO/executive director and/or senior management team Management team and staff—dependence on CEO/executive director Senior management team (if not previously covered) Staff Volunteers29

Chapter = Appendix B

Date: Dec 13, 2010

Appendix B

Time: 12:5 pm

223

Capital Structure

Capital structure in the for-profit sector is “how a firm finances its overall operations and growth by using different sources of funds.”30 The concept is quite similar for nonprofits as Clara Miller explains: Capital structure . . . is the distribution, nature and magnitude of an organization’s assets, liabilities and net assets. Every nonprofit—no matter how small or young—has a capital structure. There are many kinds of capital structure, and there is no such thing as one “correct” kind. It can be simple, with small amounts of cash supplemented by “sweat equity” and enthusiasm, or highly complex, with multiple reserves, investments and assets.31 Put simply, capital structure is figuratively “what’s in your wallet” including your credit cards, cash and checking accounts, net value of your home and car, your loans and other obligations; it’s about how you pay for your life, including whether you can go out to dinner and a movie tonight and how you would pay for it. When you add capital structure to organizational success measures, the reader gains a much deeper understanding of the overall health of the agency. Along with a graph, Table B.4 shows an agency in crisis. After three years of significant deficits, operating reserves are now negative and although working capital is still positive, it has fallen dramatically. In other words, the agency is running out of cash. The working capital ratio is part of Charity Navigator’s organizational capacity troika of “average annual growth of primary revenue, average annual growth of program expenses, and working capital ratio.”32 Even though your agency may not be listed in Charity Navigator’s database, there’s a good chance that an agency you admire is listed, which allows for comparison. Though quite similar to working capital, operating reserves and the accompanying ratio are equally valuable because these come from a recent study of more than 2,600 organizations in the Washington, DC, area.33 For more formulas to help calculate risk tolerance and financial condition, Thomas McLaughlin is the go-to source.34

Comparisons Remember from earlier in this book that high performance is always an issue of comparison. Sometimes you compare yourself to others as Michael Porter recommends in his definition of operational effectiveness as “performing similar activities better than rivals perform them.”35 It is likely that you already gave thought to this when you learned about the best of best in your field, but in case you didn’t compare your agency

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

224

Appendix B

TABLE B.4 Comprehensive Organizational Financial Success Measures ($ in thousands)

Year 6

Year 5

Year 4

Year 3

Year 2

Year 1

Profit & Loss Contributed Revenue Earned Revenue

2,330 177

3,552 74

3,305 121

2,431 140

3,477 295

3,412 131

Total Revenue

2,507

3,626

3,426

2,571

3,772

3,542

Total Expenses

2,072

1,998

2,868

2,962

4,065

3,877

435

1,628

558

986 554 432

3,583 1,519 2,064

3,968 1,344 2,624

3,589 1,349 2,239

2,949 999 1,950

2,463 864 1,599

0.17 5.6 150 0.88

0.45 10.6 860 5.20

0.16 11.4 1,015 4.40

(0.15) 10.9 1,109 4.67

(0.08) 3.9 637 1.93

(0.09) 2.1 148 0.47

784 0.38

1,477 0.74

1,681 0.59

1,403 0.47

789 0.19

382 0.10

Excess/(Deficit) Balance Sheet Assets Liabilities Net Assets Capital Structure Total MarginA Current ratioB Operating ReservesC Operating Reserves ratioD months Working CapitalE Working Capital RatioF years

A

(390)

(293)

(335)

Total Margin: (Total Revenue minus Total Expenses) divided by Total Revenue Ratio: ≥ 2 is preferred; Current Assets divided by Current liabilities C Operating Reserves: Unrestricted Net Assets minus [(Land, Buildings, and Equipment) minus (Mortgages and Other Notes Payable)] D Operating Reserves Ratio: ≥ 3 months is preferred; Operating Reserves divided by [(Total Functional Expenses minus Depreciation) divided by 12]. (A. Blackwood and T. Pollak, “Washington-Area Nonprofit Operating Reserves” in The Urban Institute (No. 20), July 2009. E Working Capital: (Cash, Savings, Acounts Receivable, Pledges Receivable, Grants Receivable, Investments, and perceivable liquid Other Investments) minus (Accounts Payable, Grants Payable, and Other Liabilities). (L. Giles, “Charity Navigator Working Capital Formula,” personal communication, September 11, 2009.) F Working Capital Ratio:>1 year is best; Working Capital divided by Total Expenses B Current

Chapter = Appendix B

Date: Dec 13, 2010

Time: 12:5 pm

225

Appendix B

TABLE B.5 Best-of-Best Comparisons Agency Years of 990 Data Reviewed

Best A 5

Best B 6

Profit and Loss Contributed Revenue Program Services Membership Dues Other Earned Revenue

631,945 48,333 649,495 233,808 87,497 253,975 145,739 166,980

Best C 6 146,720 207,096 452,606 320,266

A, B, C Average

Our Agency 6

275,666 129,721 363,466 0 264,693 14,262 210,995 1,102

Total Revenue

1,514,675 703,095 1,126,688 1,114,819 145,085

Expenses

1,508,223 640,819 1,067,278 1,072,107 118,497

Net Revenue 6,452 62,276 59,409 42,712 26,586 Balance Sheet Net Assets 5,046,631 625,390 5,232,404 3,634,808 330,248 Ratios Contributed/Total Revenue % 42 7 13 21 68 Dues/Total Revenue % 6 36 40 27 31 Net Revenue/Revenue % 0 9 5 5 18

then, do it now. One of the best ways to begin thinking about comparisons is to match up your financials with the best of the best in your field. Table B.5 shows an example. What can you learn from such a simple layout? First, the ratio of contributed to total revenue for our agency is more than triple the average of the best practices. Granted, our agency is smaller, but this certainly suggests that one of the opportunities is to ramp up earned income. Second, the perclient revenue of the best practices is two-and-a-half times higher, which suggests either a pricing problem or an issue with the perceived value of services. However you do it, don’t forget David Renz and Robert Herman’s advice, “The comparison may be to the same organization at earlier times, or to similar organizations at the same time, or to some ideal model, but effectiveness assessments are always a matter of some kind of comparison.”36

Match In order to decide what goes forward, return to the “Fast and Slow” section in Chapter 9 for suggestions on how to make the decision. A final word of caution about the launch of any strategy built on the hope of generating profits for your agency: “a large share fail.”37 A survey from Community Wealth Ventures found that only 42 percent of ventures

Chapter = Appendix B

226

Date: Dec 13, 2010

Time: 12:5 pm

Appendix B

achieved profitability and just 5 percent (four agencies) of all the 72 studied earned more than $50,000 in profit.38 A different study of 41 agencies by William Foster and Jeffrey Bradach found 71 percent of ventures were money losers, 25 percent were in the black, and 5 percent made it to breakeven.39 A much larger sample of 217 agencies operating for-profit businesses found that about 35 percent were profitable, 19 percent were at breakeven, and 35 percent were being subsidized.40 Put differently, about 55 percent made it to breakeven or better and about 55 percent made to breakeven or worse. To be fair, money isn’t everything. Eighty percent report that new ventures boosted reputation, three out of four get better delivery or a more focused mission, and two in three build a more entrepreneurial agency.41 Indeed, most—two out of three—don’t do it for the money, but for the social impact.42 Is it bad that most earned income ventures do not make it to profitability? Of course not. One can easily argue that every dollar of income you earn is one more you can allocate to mission. There will always be people who want nonprofits to be self-sustaining without contributed income, but such a viewpoint is unrealistic. And it denies the simple fact that many people want to help and receive great personal benefit from giving. Who are you to deny them the chance to get to Heaven through their good deeds? Depending on which study you consider, from 47 percent to 58 percent of all monies flowing into nonprofits are of the earned income variety.43 Although earned income, social enterprise, social entrepreneurship, fourthsector activity, or whatever you want to call it is the newest, hottest topic, it has been around a long, long time.44 Earned income is every bit as important as contributed income; one is not necessarily better than the other. Indeed, a number of experts have found that one without the other is a riskier proposition. For example, Clara Miller of the Nonprofit Finance Fund found in a study of 1,005 agencies with budgets of more than $1 million that “a second source of revenue, usually fundraising, is required just to achieve break-even.”45 Wolfgang Bielefeld’s study of mortality patterns found “nonprofits that ceased to operate were younger and smaller, used fewer strategies to attract funders, and had less diversified income streams than survivors.”46 Whether it is charging more for the sodas in the basement machine, upping the price of continuing services, or launching a new line of business meant to be profitable, earned income strategies can make a big difference.47 Don’t forget, however, that roughly two-thirds of nonprofits in a study of nonprofit innovation wanted to, but were unable to adopt an innovation in the last two years and “the vast majority of all respondents (86 percent) attributed their inability to adopt a proposed innovation to lack of funding.”48 As such, getting into the swim of earned income seems best done from the shallow end of the pool as opposed to from the diving board.

Chapter = Appendix C

Date: Dec 7, 2010

Time: 8:50 am

APPENDIX

C

Final Answers

F

inal Answers goes for a deeper dive around the strategies that made it through the First Cut. There are four primary sections: strategy, marketing, money, and management. Compared to the First Cut where there was more detail, a more cursory approach is taken in Final Answers because it is much more dependent on the strategy itself. Final Answers contains five distinct elements: strategy, marketing, money, management, and your final answer.

Strategy Like First Cut, Final Answers begins with a description of the strategy. You build on the information you have collected in the First Cut and expand on it. Peter Brinckerhoff uses a three-question approach: ■ ■ ■

What precisely will the business idea do? How will it benefit the organization? What are the characteristics of businesses of this type?1

Because you are beginning to think about how to pitch the strategy to people outside of the organization, I like to use the five questions from Bernard Ross and Claire Segal for building a case statement: ■ ■ ■ ■ ■

What is the need? What evidence is there that this is a pressing need? How are you uniquely qualified to tackle this need? What will be the benefits of your action? What are the negative consequences if you fail?2

227

Chapter = Appendix C

228

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

Marketing You will likely want to do more thorough research and move from direct conversation with your customers to focus groups, test marketing, and/or survey research. A focus group typically works this way: A focus group consists of eight to ten members of your target market (try to include both current customers and potential customers who don’t know you at all) who are guided by a facilitator to answer open-ended questions about a specific topic. Focus groups are a low-cost means of conducting face-to-face interviews, with the additional benefit of interactions that occur within the group.3 Survey research is most often quantitative—although qualitative interviewing is gaining in popularity—and can range from a simple web-based protocol like SurveyMonkey to telephone surveys or direct mail. Research can be fast and cheap or slow and costly. The difference is usually in validity, reliability, and generalizability to the customer population. Though quantitative research yields useful data that can be analyzed quickly and is usually generalizable, qualitative interviewing generates more nuanced and granular information that is not generalizable. Of particular importance is test marketing, as explained by Kristen Majeska, “Test marketing is essentially performing an experiment. Rather than asking your customers what they think they’d do, you give them the opportunity, record the results, and if you’re entrepreneurial, you figure out why they did what they did.”4 Do not let the brevity of this paragraph fool you into underestimating the value of test marketing. It can be an extremely powerful method for understanding the rewards and risks of your strategy. This is because, unlike research where you are asking someone hypothetical questions, you are actually testing your strategy in real time. Sometimes you do fall in love at first sight, but even those people don’t get married that day (unless they’re in Vegas); they date first. You’ll also need to think about how you intend to promote your strategy to your intended market including sales, branding, and the like. Peter Brinckerhoff has a list of questions you can consider: How are you going to find out what your markets want and then give it to them? How are you going to let them know that you exist? How are you going to assure that they are happy and bring others back with them? Who are your target markets and who are your secondary markets?5 This all adds up to a marketing plan that, according to Christopher Lovelock, should include situation analysis, marketing program goals,

Chapter = Appendix C

Appendix C

Date: Dec 7, 2010

Time: 8:50 am

229

marketing strategies, marketing budget, marketing action plan and schedule, and monitoring system. In particular, marketing strategies address the following: ■

Positioning Target segments ■ Competitive differentiation ■ Value proposition: distinctive benefits Marketing mix ■ Core product, supplementary services, and delivery systems ■ Price and trade terms (if selling through intermediaries) ■ Marketing communication: advertising, personal selling, promotion, and so on6 ■

■

Because of the importance of marketing to the success of many strategies related to lines of business, it is a good idea to consider employing the services of marketing consultants. It is unlikely that most nonprofits will have the expertise onboard to get to the heart of marketing strategies. Fortunately, many marketing firms offer a mix of pro bono and paid services.

Money Money is about knowing how much you have, how much you need, where you will get it, and how much you will make. To answer the first two questions, at a minimum, you will need a balance sheet, a profit-and-loss statement, and a cash-flow projection: ■

■

■

Balance sheet (“Statement of Financial Position”). This is the window into the nonprofit’s financial health. It lays out lots of good, cumulative information about the assets and liabilities of the organization and is the source for many of the components of the financial ratios. Profit-and-loss statement (Statement of Activities). On an agency basis, this statement should show the extent of the organization’s profitability. Individual program statements of profit and loss do the same thing and should go to every manager whose program produces receivables. Cash-flow projection. It’s much easier to plan for a cash-flow disaster than to be surprised by one. Someone familiar with your nonprofit’s operation should be putting together a cash-flow project stretching out one year in advance, or at the very least every quarter.7

All three reports need to take into account the start-up costs and operating costs of the strategy under consideration. Start-up costs are what it takes to get the strategy going and include capital costs like equipment

Chapter = Appendix C

230

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

purchases or facility rent and noncapital costs like licenses and consulting fees. These three reports are generally called pro-forma financials and address the following questions from Peter Brinckerhoff: ■ ■ ■ ■

What are your breakeven projections per month and per year? How long will it take to reach your breakeven numbers? Can you afford to lose money for that long a period of time? Do you have a projection of income and expense for three years, and a cash flow projection for three years?8

These aren’t the only reports you might consider, and the ratios earlier discussed are not the complete universe. But as noted, these are the basic ones you need and you can always add more. When it comes to where you’ll get the money, you are talking about sources that are earned, unearned, and borrowed. The easiest place to find the money may be the operating reserves you’ve built up over the years through modest surpluses. Another place is those underperforming or inconsequential lines of business that can be carefully jettisoned. Of course, your strategy may be fundable through a variety of sources, including donors or through debt financing. No matter where you get the money, get it you must. Undertaking a strategy without having your sources identified up front is inviting disaster. This is because once the strategy has been launched, the case for funding is dramatically reduced in stature. The performing arts center complex that was a capstone of my career—the $130 million hybrid project of nonprofit arts center, for-profit garages and food/event services, and private equity condominium tower that opened its doors on a cold March weekend—was undercapitalized from the get-go relative to endowment to cover operating costs. Though $13 million was in the original capital campaign and was achieved, it was never enough to do the job, at least $7 million more was needed. Once we realized this, the building was coming out of the ground and the capital campaign was winding down. We did our best to reboot the campaign, but the groundswell of support that had been there just months earlier had evaporated. We achieved significantly less in this afterglow campaign. Thinking that you can launch a strategy and the money will follow is wishful thinking at best. Your leverage is before the launch, not once it’s up and running. Know how much you have, how much you need and where you will get it. One of the places that board members and funders will often suggest is collaborating with other agencies. Alliances of one sort or another have been extremely durable strategies not only for saving money, but for reducing duplication of services, launching new programs, and doing things that you can’t do on your own. This is not necessarily a bad idea even if most for-profit mergers fail.9 Although there are far fewer nonprofit mergers,10

Chapter = Appendix C

Date: Dec 7, 2010

Appendix C

Time: 8:50 am

231

the success rate appears to be much higher; expert David La Piana pegs his own success rate at about 70 percent.11 The central question here is not whether mergers work, but whether they save money that can be reallocated to your strategies. Unfortunately, the news here isn’t particularly promising. Linda Lampkin, former director of the National Center for Charitable Statistics, says that “bigger isn’t always better or more efficient;”12 Jan Masaoka, formerly of CompassPoint, concludes that “nonprofit mergers don’t result in reducing administrative costs;”13 and Robert Harrington, with La Piana Associates agrees, “Organizations probably should not enter into a merger with the primary goal of saving money.”14 There are two things to keep in mind about alliances. First, you need a better reason for doing them than saving money. Second, keep David La Piana’s thoughts in mind, “Collaboration often offers real advantages ‘on the ground,’ where services are coordinated, but at a stiff price. Many times, the results of collaboration do not justify the effort; resources are dispersed and the need for collaborative coordination grows.”15 The final question of how much you will make is obviously about crunching numbers and requires an honest analysis of revenue and expenses. That said, the whole purpose of this question is to beg the question of whether the strategy is worth doing.

Management Management includes a potpourri of issues including corporate structuring (e.g., for-profit, nonprofit), tax issues (e.g., unrelated business income tax, organizational structure), and organizational matters (e.g., delegation and accountability). Many agencies I work with bring up these topics early on, but I always discourage going into too much detail, especially about the first two issues. First, when it comes to corporate structuring, it is “overused, overrated, and misunderstood.”16 Second, when it comes to the tax issues, words of wisdom come from Peter Brinckerhoff, “If your organization makes a profit from activities not included in your mission statement, your organization, like any other, should pay a tax on those profits. That’s it. Pretty simple and straightforward.”17 And based on the research, if you find yourself having to pay those taxes, count yourself lucky, as profitability is elusive. It’s not that these corporate structure or tax issues aren’t important; it is just that when you need to address these, you won’t to do it on your own. The best advice about these is to get capable counsel and let them guide you. Moreover, these questions are among the final ones you will address and often when you’re well into implementation. The other question of organizational matters is worth thinking about now. The delegation question of who does what needs to be answered, as

Chapter = Appendix C

Date: Dec 7, 2010

232

Time: 8:50 am

Appendix C

does the accountability question of when did it happen. Many a strategy has been brought to its knees in implementation because no one thought about these questions. You will also want to consider the matter of where the strategy will live relative to the reporting relationships. In the performing arts center I helmed, we decided to implement a new line of business to celebrate the diversity of our community. A capable person was hired to head up the effort that was embedded in the programming group where all the programming activity lived, including the massively important Broadway Series. The programming group also contained the marketing function. Because the new diversity program was tiny compared to the Broadway Series, the diversity director couldn’t catch a break for resources. She could program the events, but getting the marketing department to pay attention was next to impossible. And who could blame them? A little gospel quartet can’t compete for attention against a big Broadway show like Phantom of the Opera. The diversity program never quite got off the ground, never achieved its promise. A better approach would have been to set up a diversity group with its own team, including marketing in a different set of offices away from the programming group and reporting directly to my office. The questions you want to ask when it comes to management of the strategy are big and little. Ones like corporate structure and issues are best addressed with capable outside counsel and later on. Organizational matters like reporting relationships, space, and resources, can be handled internally, but should be dealt with well before implementation.

Final Answer Making the final decision about whether to go forward with your strategy requires a look at contingencies for what could go wrong, considering whether to do a business plan, and coming to your final answer about the strategy you are considering.

Contingencies Before you close out Final Answers, it is very important to do some work around contingencies for when something goes wrong. And something will go wrong. “You may as well accept it right up front, before you take another step toward implementation: reality will not follow your plan.”18 There is not a strategy on Earth that didn’t somehow stumble in implementation. Don’t forget the words of Scott Anthony, borrowed from the great Prussian General Helmuth von Moltke: “No business plan ever survived its first encounter with

Chapter = Appendix C

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

233

the market.”19 That’s why you need to think about contingencies up front. The reason is summarized in a much pilloried quote from Donald Rumsfeld: There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.20 What can go wrong with your strategy? Plenty. Here are the reasons for why business plans fail, from Patricia Caesar and Thomas Baker: In some cases it is simply because the plan was based on a bad strategy in the first place—a product or service for which there is no market, a new venture that doesn’t fit with the organization’s brand or capabilities. Far more often, however, the idea and the strategy are good enough, but the organization fails to follow through on and execute the plan. . . . These details of execution are not details at all—in many cases they make the difference between a plan’s success or failure.21 The checklist for anticipating these problems includes the following questions: ■ ■ ■ ■ ■ ■

Have you validated your idea in the marketplace? Are your pricing and revenue assumptions correct? Have you put the right performance metrics in place? Do you have the right team? Are expectations in your organization set at the right level? What if reality does not follow the plan?22

Here are Rosabeth Moss Kanter’s four classic traps for why innovations fail: 1. Strategy Mistakes: Hurdles Too High, Scope Too Narrow. In seeking the killer app, managers may reject opportunities that at first appear too small, and people who aren’t involved in the big projects may feel marginalized. 2. Process Mistakes: Controls Too Tight. The impulse to strangle innovation with tight controls—the same planning, budgeting, and reviews applied to existing businesses. 3. Structure Mistakes: Connections Too Loose, Separations Too Sharp. Companies must be careful how they structure . . . to avoid a clash of cultures or conflicting agendas. The most dramatic approach is to create a unit apart from the mainstream, which must still serve its embedded base.

Chapter = Appendix C

234

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

4. Skills Mistakes: Leadership Too Weak, Communication Too Poor. Undervaluing and underinvesting in the human side of innovation23 A different way to think about what can go wrong comes from BoardSource’s most recent governance index. Responses from 2,152 board and staff members put their most pressing organizational challenges in order of priority. Number one was financial sustainability, closely followed by fund raising, and then strategy.24 In other words, what holds you back will be a lack of financial sustainability and fund raising; what takes you forward will be strategy. But it is not a mutually exclusive choice of one over the other. Nor should it be. It is the combination of operational effectiveness and competitive strategy that is essential to success.25 Operational effectiveness and competitive strategy go hand in hand. Or as Andy Grove of Intel fame puts it, “I don’t think we should forget that there is more to running an enterprise, small or large, than strategy. . . . Figuring out what to do is important. . . . Doing [it] well is equally important.”26 Do not be seduced by the allure of the former at the expense of the latter. As Larry Bossidy and Ram Charan warn: When companies fail to deliver on their promises, the most frequent explanation is that the CEO’s strategy was wrong. But the strategy itself is not often the cause. Strategies most often fail because they aren’t executed well. Things that are supposed to happen don’t happen. Either the organizations aren’t capable of making them happen, or the leaders of the business misjudge the challenges their companies face in the business environment, or both.27 The workaround to dealing with the known and unknown is to craft a four-point compass of indicators that are vitally important to the success of your strategy. You can use whatever grouping you like that is relevant to the strategy, but consider the following ones to begin with: ■ ■ ■

■

Market: What must your customer do for your strategy to succeed? Muscle: What must happen with organizational capacity? Money: How much money you have, how much you need, where will you get it, and how much you will make. Measures: What are the few early-warning measures that must be tracked religiously?

Once you have clarified these for your strategy, you will have four groups of key indicators—a compass of sorts—to let you know when things are off course. You then construct brief scenarios about what you will do, your contingency plan, for each of the four elements. These contingency

Chapter = Appendix C

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

235

plans should not be overly complicated, but have enough structure to guide first responders to whom you have delegated accountability for tracking each of the indicators.

Business Plan Business plans are one way to pull all the pieces together for a final answer about whether to go forward. To be fair, many agencies will wait until after a final answer has been reached before crafting a business plan, if they do one at all. After all, about half of all nonprofits launching ventures skip this step and move right to implementation.28 In the for-profit sector, the number is lower; Amar Bhide learned that only 3 in 10 founders of entrepreneurial companies wrote up full-blown business plans, and 2 out of 5 had no plan at all.29 For some, a business plan is quite similar to the Results Now master plan. Says Jeanne Rooney, “A business plan is not just one forecast about one program, one function, or one resource. Instead it is a blend of the expectations about multiple factors into one plan framing the future.”30 Others see the business plan as a communication device used primarily to represent a specific strategy to stakeholders in general and funders in particular.31 On the whole, the business plan is both pitch and plan. For William Sahlman, the most effective business plans focus on four factors: people, opportunity, context, and risk and reward.32 For Peter Brinckerhoff, the business plan should have the following contents: A title page identifying the business plan as the property of your organization A table of contents A summary of the plan A description of your organization and its business A description of the market for your product or service A marketing plan A financial plan Business plan goals and objectives with a time line An appendix (if needed)33 The Small Business Administration’s template for a business plan contains the following table of contents: I. The Business A. Description of business B. Marketing C. Competition D. Operating procedures E. Personnel F. Business insurance

Chapter = Appendix C

Date: Dec 7, 2010

236

Time: 8:50 am

Appendix C

II. Financial Data A. Loan applications B. Capital equipment and supply list C. Balance sheet D. Breakeven analysis E. Pro-forma income projections (profit-and-loss statements) F. Three-year summary G. Detail by month, first year H. Detail by quarters, second and third years I. Assumptions on which projections were based J. Pro-forma cash flow III. Supporting Documents A. Tax returns of principals for last three years, personal financial statement (all banks have these forms) B. For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor C. Copy of proposed lease or purchase agreement for building space D. Copy of licenses and other legal documents E. Copy of resumes of all principals F. Copies of letters of intent from suppliers, etc.34 You might also consider the many excellent software providers that provide comprehensive tools for business planning. Among the most popular is Business Plan Pro from Palo Alto Software, which offers the user three different templates—simple, standard, and financials only—along with a plentiful database of sample for-profit and nonprofit business plans. Because many of the necessary issues have been explored in the First Cut and Final Answers, putting a business plan together is easier to do. But keep in mind William Sahlman’s warning: Most waste too much ink on numbers and devote too little to the information that really matters to intelligent investors. As every seasoned investor knows, financial projections for a new company—especially detailed, month-by-month projections that stretch out for more than a year—are an act of imagination.35

Final Answer Pulling all of the diverse pieces together to come up with the Final Answer is not an easy task. But by summarizing the case for and against each strategy and availing yourself of the information from Good Ideas and First Cut, you can put together a strong discussion document and reach a final answer

Chapter = Appendix C

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

237

about what to do next. The question here is a simple albeit critically important one: is your strategy feasible based on what you know now and in line with your purpose? Before coming to the final answer, keep in mind that the launch of a major strategy often requires a commensurate change effort within the organization. Unfortunately, most change efforts fail. Says Peter Senge, “Clearly, businesses do not have a very good track record in sustaining significant change. There is little to suggest that schools, healthcare institutions, governmental, and nonprofit institutions fare any better.”36 After a decade of observation, change expert John Kotter comes to the same conclusion, “A few of these corporate change efforts have been very successful. A few have been utter failures. Most fall somewhere in between with a distinct tilt toward the lower end of the scale.”37 One of the fundamental reasons for the dismal track record is that people resist change.38 Indeed, people in organizations “often resist change even when their environments threaten them with extinction.”39 James O’Toole puts it as directly as it comes, “In all instances of modern society, then, change is exceptional. When it comes about, it does so primarily as a response to outside forces.”40 It’s convenient to blame change failures on the people who resist change, but many times, resistance is the right thing to do. When an organization looks major change in the eye, say Clayton Christensen and Michael Overdorf, “the worst possible approach may be to make drastic adjustments to the existing organization. In trying to transform an enterprise, managers can destroy the very capabilities that sustain it.”41 Before closing, you have one last chance to reconsider your decision to go forward by using a list of “change or die” questions from Jeffrey Pfeffer and Robert Sutton: 1. 2. 3. 4. 5. 6. 7. 8.

Is the practice better than what you are doing right now? Is the change really worth the time, money, and disruption? Is it best to make only symbolic changes instead of core changes? Is doing the change good for you, but bad for the company? Do you have enough power to make the change happen? Are people already overwhelmed by too many changes? Will people be able to learn and update as the change unfolds? Will you be able to pull the plug?42

If you arrive at thumbs up, consider whether you have the four essential elements required for leading change: 1. People are dissatisfied with the status quo. 2. The direction they need to go is clear (at least much of the time), and they stay focused on that direction.

Chapter = Appendix C

238

Date: Dec 7, 2010

Time: 8:50 am

Appendix C

3. There is confidence conveyed to others—more accurately, overconfidence—that it will succeed (so long as it is punctuated by reflective self-doubt and updating as new information rolls in). 4. They accept that change is a messy process marked by episodes of confusion and anxiety that people must endure.43 Of all these steps, the first is most salient, “Dissatisfaction provokes people to question old ways of doing things and fuels motivation to find and install better new ways—especially when leaders can find ways to dampen fear and increase trust and psychological safety.”44 Just remember, “Even presumably good changes carry substantial risks because of the disruption and uncertainly that occur while the transformation is taking place. That’s why the aphorism ‘change or die’ is empirically more likely to be ‘change and die.’ ”45 And don’t forget the words of Michael Porter, “The essence of strategy is choosing what not to do.”46 Or as the late David Packard once warned, “More businesses die from indigestion than starvation.”47

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

APPENDIX

D

Board Meeting Advance Information Template TABLE OF CONTENTS BOARD MEETING AGENDA Topic

Convener

1. Call to Order a. Minutes of Last Meeting b. Consent Agenda

Chair

Minutes

See Page #

5

2. Accountability a. Financials b. Executive Director Summary c. Governance

Treasurer Executive Director Vice Chair

10 10 10

3. Central Meeting Content

TBA

60

4. No surprises discussion

Executive Director

5

5. Chair’s Comments

Chair

5

6. Open discussion

Chair

10

7. Governance Assessment

Chair

5

8. Adjournment

Chair 120

EXECUTIVE DIRECTOR SUMMARY Overview Lines of Business

239

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

240

Appendix D

RESULTS NOW MASTER PLAN Purpose—Why Values Mission Strategic Plan—Where to go tomorrow Lines of Business Success Measures This Yr ($ in thousands)

Yr 5

Yr 4

Yr 3

Last Yr

Plan

Forecast

Next Yr

Mission Clients Profit & Loss Contributed Revenue Earned Revenue Total Revenue Total Expenses Excess/(Deficit) Balance Sheet Assets Liabilities Total Net Assets Capital Structure Total MarginA Current ratioB Operating ReservesC Working CapitalD Lines of Business Line of Business A Line of Business B

Vision Statement Strategies A

(Total Revenue minus Total Expenses) divided by Total Revenue Current Assets divided by Current liabilities C Unrestricted Net Assets minus [(Land, Buildings, and Equipment) minus (Mortgages and Other Notes Payable)] D Working Capital: (Cash, Savings, Accounts Receivable, Pledges Receivable, Grants Receivable, Investments, and perceivable liquid Other Investments) minus (Accounts Payable, Grants Payable, and Other Liabilities) B

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

241

Appendix D

Operating Plan – What gets done today Organizational Chart Board of Directors

Committee

Committee

Committee

Committee

Executive Director

Administration

Development

Marketing

Goals Board goals Full Board Committees Officers Board Members Staff goals Administration Development Marketing Programming

Programs

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

242

Appendix D

Budget Actual For Yr Ending X/XX/XX PROFIT AND LOSS Revenue Earned Revenue

Contributed Revenue Total Revenue Expenses Program Services

Management and General

Fundraising

Total Expenses Net Revenue BALANCE SHEET Assets Total Assets Liabilities Total Liabilities Net Assets Unrestricted Temporarily Restricted Permanently Restricted Net Assets Total Liabilities & Net Assets

Budget For Yr Ending X/XX/XX

Forecast For Yr Ending X/XX/XX

Difference Column 3 less Column 2

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

243

Appendix D

Governance Plan – Delegation: Who does what Duties and Guidelines Board Board Duties Committee Duties Officer Duties Board, Committee, and Officer Guidelines Board Member Duties Guidelines Executive Director Duties Guidelines Governance – Accountability: When did it happen Agendas Annual Who-When-Where Full Board – February Full Board – May Full Board – July Full board – September Full board – November Full board – December

What

Results Now Master Plan first draft Results Now Master Plan final draft

Assessments Board Duties (4=best)

Feb

May

Jul

Sep

Oct

Dec

Feb

May

Jul

Sep

Oct

Dec

Feb

May

Jul

Sep

Oct

Dec

Guidelines (4=best) Board Member Duties (4=best) Guidelines (4=best) Attendance # % Executive Director Duties (4=best) Guidelines (4=best)

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

244

Appendix D

Comments Board What should we discuss at upcoming meetings?

What did you like about this meeting?

What did you not like about this meeting?

Board Member What can be done to help you do your best as a board member?

What do you like about being a board member?

What do you not like about being a board member?

Executive Director What should the executive director discuss at upcoming meetings?

What do you like about the way the executive director works with the board and board members?

What do you not like about the way the executive director works with the board and board members?

APPENDICES Minutes Motions Contact Information Miscellaneous

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

245

Appendix D

GOVERNANCE ASSESSMENT FORM Duties and Guidelines Board Duties: Circle how well the full board is doing (4=best) 1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

Board Guidelines: Circle how the full board is doing (4=best)

Board Member Duties: Circle how you are doing (4=best)

Board Member Guidelines: Circle how you are doing (4=best)

Executive Director Duties: Circle how he/she is doing (4=best)

Executive Director Guidelines: Circle how he/she is doing (4=best)

Comments Board What should we discuss at upcoming meetings? What did you like about this meeting? What did you not like about this meeting? Board Member What can be done to help you do your best as a board member? What do you like about being a board member? What do you not like about being a board member? Executive Director What should the executive director discuss at upcoming meetings? What do you like about the way the executive director works with the board and board members? What do you not like about the way the executive director works with the board and board members?

Chapter = Appendix D

Date: Dec 13, 2010

Time: 11:32 am

Chapter = c01

Date: Dec 13, 2010

Time: 12:12 pm

Notes

Preface 1. D. Linnell, Evaluation of Capacity Building: Lessons from the Field (Washington: Alliance for Nonprofit Management, 2003), 5. 2. H. Mintzberg, “The Fall and Rise of Strategic Planning,” Harvard Business Review 72(1) (1994): 107. 3. K. Wing, K. L. Roeger, and T. Pollak, The Nonprofit Sector in Brief: Pubic Charities, Giving, and Volunteering, 2009 (Washington, DC: Urban Institute, 2010). 4. M. M. Stone, B. Bigelow, and W. Crittenden, “Research on Strategic Management in Nonprofit Organizations,” Administration & Society 31(3) (1999): 409. 5. K. LeRoux and N. S. Wright, “Does Performance Measurement Improve Strategic Decision Making? Findings from a National Survey of Nonprofit Social Service Agencies,” Nonprofit & Voluntary Sector Quarterly 39(4) (2010): 583. 6. R. S. Kaplan and D. P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74(1) (1996): 81. 7. J. Carver and M. M. Carver, Reinventing Your Board: A Step-by-Step Guide to Implementing Policy Governance (San Francisco: Jossey-Bass, 1997), 30. 8. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994), 29. 9. P. B. Crosby, Quality Is Free: The Art of Making Quality Certain (New York: McGraw-Hill, 1979), 66.

Part I 1. J. Peters and T. Wolfred, Daring to Lead: Nonprofit Executive Directors and Their Work Experience (San Francisco: CompassPoint Nonprofit Services, 2001), 4. 2. Ibid., p. 21. 3. Ibid., p. 3. 4. J. G. Dees and P. Economy, “Social Entrepreneurship.” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 1. 5. J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 161–197; J. Carver, Boards that Make a Difference (San Francisco: Jossey-Bass, 1997); R. Chait, T. Holland, and B. Taylor, Improving the Performance of Governing Boards (Phoenix, AZ: Oryx Press, 1996); P. Light, “The Content of Their Character: The State of the Nonprofit Workforce,” Nonprofit Quarterly 9(3) (2002): 6–16. 6. Peters and Wolfred, 2001, p. 14.

247

Chapter = c01

Date: Dec 13, 2010

248

Time: 12:12 pm

Notes

7. Ibid., p. 20. 8. P. Light, Pathways to Nonprofit Excellence (Washington, DC: Brookings Institution Press, 2002), 9–10. 9. Ibid., p. 10. 10. C. J. D. Vita and C. Fleming, eds., Building Capacity in Nonprofit Organizations (Washington, DC: Urban Institute, 2001), 4. 11. Light, 2002, p. 12. 12. Ibid., p. 9. 13. L. Brenner, “How Does Your Salary Stack Up?” Parade, April 13, 2008: 8. 14. Peters and Wolfred, 2001. 15. “How the Economy Looks to You,” Parade, April 13, 2008: 12. 16. C. B. Handy, The Hungry Spirit: Beyond Capitalism: A Quest for Purpose in the Modern World, 1st ed. (New York: Broadway Books, 1998), xix.

Chapter 1 1. C. Letts, W. P. Ryan, and A. Grossman, High Performance Nonprofit Organizations: Managing Upstream for Greater Impact (New York: John Wiley & Sons, 1999). 2. P. F. Drucker, Management: Tasks, Responsibilities, Practices, 1st ed. (New York: Harper & Row, 1974), 45. 3. K. S. Cameron, “Effectiveness as Paradox: Consensus and Conflict in Conceptions of Organizational Effectiveness,” Management Science 32(5) (1986): 539–544. 4. R. Herman and D. Renz, “Nonprofit Organizational Effectiveness: Contrasts between Especially Effective and Less Effective Organizations,” Nonprofit Management and Leadership 9(1) (1998): 23–38; R. Herman and D. Renz, “Theses on Nonprofit Organizational Effectiveness,” Nonprofit and Voluntary Sector Quarterly 28(2) (1999): 107–126; B. Kibbe, “Investing in Nonprofit Capacity.” In B. Kibbe & Grantmakers for Effective Organizations (Organization), eds., Funding Effectiveness: Lessons in Building Nonprofit Capacity, 1st ed. (San Francisco: Jossey-Bass, 2004); S. C. Selden and J. E. Sowa, “Testing a Multi-dimensional Model of Organizational Performance: Prospects and Problems,” Journal of Public Administration Research and Theory 14(3) (2004): 395–416; J. E. Sowa, S. C. Selden, and J. Sandfort, “No Longer Unmeasurable? A Multidimensional Integrated Model of Nonprofit Organizational Effectiveness,” Nonprofit and Voluntary Sector Quarterly 33(4) (2004): 711–728. 5. D. P. Forbes, “Measuring the Unmeasurable: Empirical Studies of Nonprofit Organization Effectiveness from 1977 to 1997,” Nonprofit and Voluntary Sector Quarterly 27(2) (1998): 183. 6. Herman and Renz, 1999, p. 121. 7. B. Wolverton, “Founder of eBay Announces New Approach to His Giving,” April 15, 2004. Retrieved May 18, 2004, from http://philanthropy.com/premium/articles/v16/ i15/15003702.htm. 8. Herman and Renz, 1999, p. 122. 9. P. F. Drucker, The Drucker Foundation Self-Assessment Tool: Participant Workbook (San Francisco: The Drucker Foundation; Jossey-Bass, 1999), 8. 10. C. Gunter, “Mouse Genome: The Mighty Mouse,” Nature Reviews Genetics 4(1) (2003): 4. 11. D. L. Farror, E. R. Valenzi, and B. M. Bass, “A Comparison of Leadership and Situational Characteristics within Profit and Non-profit Organizations,” Academy of Management Proceedings (1980): 334–338. 12. A. M. Parhizgari and G. R. Gilbert, “Measures of Organizational Effectiveness: Private and Public Sector Performance,” Omega 32 (2004): 221; Ibid.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

249

13. J. Peters and T. Wolfred, Daring to Lead: Nonprofit Executive Directors and Their Work Experience (San Francisco: CompassPoint Nonprofit Services, 2001). 14. M. Wiersema, “Holes at the Top: Why CEO Firings Backfire,” Harvard Business Review 80(12) (2002): 70–77. 15. R. M. Kanter and D. V. Summers, “Doing Well While Doing Good: Dilemmas of Performance Measurement in Nonprofit Organizations and the Need for a MultipleConstituency Approach.” In W. W. Powell, ed., The Nonprofit Sector: A Research Handbook (New Haven, CT: Yale University Press, 1987), 154. 16. N. Kleiman and N. Rosenbaum, The Limits of Social Enterprise: A Field Study & Case Analysis (New York: Seedco; S. P. Center Document Number, 2007), 4. 17. R. D. Shriner, “How Alike Are Nonprofits and For-Profit Businesses?” Retrieved December 31, 2005, from www.nonprofits.org/npofaq/18/82.html; emphasis changed to italics. 18. Herman and Renz, 1998, pp. 25–26. 19. D. Renz and R. Herman, “More Theses on Nonprofit Organizational Effectiveness,” ARNOVA News 33 (Fall 2004): 10. 20. Herman and Renz, 1998, pp. 25–26. 21. Herman and Renz, 1997, p. 202. 22. R. Herman and D. Renz, “Doing Things Right: Effectiveness in Local Nonprofit Organizations, a Panel Study,” Public Administration Review 64(6) (2004): 695. 23. Renz and Herman, 2004, p. 10; emphasis as written. 24. M. E. Porter, “What Is Strategy?” Harvard Business Review 74(6) (1996): 62. 25. Renz and Herman, 2004, p. 10 26. D. Linnell, Evaluation of Capacity Building: Lessons from the Field (Washington: Alliance for Nonprofit Management, 2003), 5. 27. E. E. Olson and G. H. Eoyang, Facilitating Organization Change: Lessons from Complexity Science (San Francisco: Jossey-Bass, 2001), 62. 28. P. Sellers and E. Gustafson, “Most Powerful Women Entrepreneurs: Susan Walvius and Michelle Marciniak.” Retrieved December 18, 2009, from http://money.cnn.com/ galleries/2009/fortune/0912/gallery.most powerful women entrepreneurs.fortune/ index.html. 29. J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies, 1st ed. (New York: HarperBusiness, 1994), 10. 30. R. Herman and D. Renz, Nonprofit Organizational Effectiveness: Practical Implications of Research on an Elusive Concept (Kansas City, MO: Midwest Center for Nonprofit Leadership, 2003), 6. 31. R. Herman and D. Renz, “Advancing Nonprofit Organizational Effectiveness Research and Theory,” Nonprofit Management & Leadership 18(4) (2008): 405. 32. D. Renz, “Re: Nonprofit Organizational Effectiveness: Practical Implications on an Elusive Concept.” In M. Light, ed. (email correspondence) (Kansas City: David Renz, 2005). 33. K. S. Cameron, “The Effectiveness of Ineffectiveness,” Research in Organizational Behavior 6 (1984): 279. 34. A. S. Tsui, “A Role Set Analysis of Managerial Reputation,” Organizational Behavior and Human Performance 34(1) (1984): 93. 35. R. M. Kanter and D. Brinkerhoff, “Organizational Performance: Recent Developments in Measurement,” Annual Review of Sociology 7 (1981): 345. 36. M. M. Stone and S. Cutcher-Gershenfeld, “Challenges of Measuring Performance in Nonprofit Organizations.” In P. Flynn & V. A. Hodgkinson, eds., Measuring the Impact of the Nonprofit Sector (New York: Kluwer Academic/Plenum, 2002), 39. 37. B. Blumenthal, Investing in Capacity Building: A Guide to High-Impact Approaches (Washington, DC: Foundation Center, 2003), 21. 38. “What? Me Measure?” Stanford Social Innovation Review 2(1) (2004): 5.

Chapter = c01

Date: Dec 13, 2010

250

Time: 12:12 pm

Notes

39. K. P. Enright, “Flexible Framework for Organizational Effectiveness.” In B. Kibbe, ed., Funding Effectiveness: Lessons in Building Nonprofit Capacity, 1st ed. (San Francisco: Jossey-Bass, 2004), 10–11. 40. K. S. Cameron and D. A. Whetten, “Organizational Effectiveness: One Model or Several?” In K. S. Cameron & D. A. Whetten, eds., Organizational Effectiveness: A Comparison of Multiple Models (New York: Academic Press, 1983), 2. 41. R. Cohen, “Funding Effectiveness for the Long Haul.” In B. Kibbe, ed., Funding Effectiveness: Lessons in Building Nonprofit Capacity, 1st ed. (San Francisco: Jossey-Bass, 2004), 147–148. 42. Cameron, 1986, p. 544. 43. Sowa, Selden, and Sandfort, 2004, pp. 711–712. 44. Quoted in G. Williams, “Departure of Nonprofit Coalition’s Leader Raises Questions about Future,” The Chronicle of Philanthropy 14 (August 22, 2002): 25–26. 45. R. Herman and D. Renz, “Multiple Constituencies and the Social Construction of Nonprofit Organizational Effectiveness,” Nonprofit and Voluntary Sector Quarterly 26(2) (1997): 202. 46. Cameron and Whetten, 1983, p. 2. 47. Herman and Renz, 1997, p. 202. 48. P. Connolly and P. York, “Evaluating Capacity-Building Efforts for Nonprofit Organizations,” OD Practioner 34(4) (2002): 33; K. P. Kearns, “Management-Capacity Building in the Pittsburgh Region,” Nonprofit Management and Leadership 14(4): 438. 49. Cohen, 2004, p. 4; Linnell, 2003, p. 13; P. McPhee and J. Bare, “Introduction.” In C. J. D. Vita and C. Fleming, eds., Building Capacity in Nonprofit Organizations (Washington: Urban Institute, 2001), 1. 50. P. Connolly, P. York, S. Munemitsu, C. Ruiz-Healy, A. Sherman, and C. Trebb, Building the Capacity of Capacity Builders: A Study of Management Support and Field-Building Organizations in the Nonprofit Sector (New York: Conservation Company, 2003), 1; Ibid. 51. “Organizational Effectiveness—Updated.” Retrieved January 15, 2004, from http:// fdncenter.org/pnd/specialissues, November 13, 2003. 52. L. Campobasso and D. Davis, Reflections on Capacity Building (Woodland Hills, CA: California Wellness Foundation, 2001), 4. 53. Kibbe, 2004, p. 4. 54. Kearns, 2004, p. 437. 55. Linnell, 2003, p. 13. 56. Ibid., p. 13. 57. Kibbe, 2004, p. 4. 58. J. E. Lee, “Setting Clear Goals with High Expectations. In B. Kibbe, ed., Funding Effectiveness: Lessons in Building Nonprofit Capacity, 1st ed. (San Francisco: Jossey-Bass., 2004); Ibid., pp. 64–65. 59. Kibbe, 2004; Ibid. 60. Letts, Ryan, and Grossman, 1999. 61. Light, Pathways to Nonprofit Excellence, (Washington, DC: Brookings Institution Press, 2002), 30. 62. Herman and Renz, 1999, p. 123. 63. Light, 2002. 64. Herman and Renz, 1998.

Chapter 2 1. P. B. Crosby, Quality Is Free: The Art of Making Quality Certain (New York: McGraw-Hill, 1979), 66.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

251

2. G. A. Miller, E. Galanter, and K. H. Pribram, Plans and the Structure of Behavior (New York: Holt, Reinhart, and Winston, 1960). 3. D. Lester, Theories of Personality: A Systems Approach (Washington, DC: Taylor & Francis, 1995), 72. 4. J. M. Burns, Leadership, 1st ed. (New York: Harper & Row, 1978), 455. 5. R. A. Heifetz, Leadership without Easy Answers (Boston: Belknap Press of Harvard University Press, 1994); P. G. Northouse, Leadership: Theory and Practice, 2nd ed. (Thousand Oaks, CA: Sage, 2001); G. Yukl, Leadership in Organizations, 5th ed. (Upper Saddle River, NJ: Prentice Hall, 2002). 6. D. Rigby, Management Tools 2003 (Boston: Bain & Company, 2003), 2. 7. C. Krauss, Use of Management Tools Leaps 60% as Managers Seek to Navigate Economic Uncertainty (Boston: Bain & Company, 2003). 8. W. G. Bennis, and R. J. Thomas, “The Alchemy of Leadership,” CIO, December 2002: 16. 9. D. Rigby and B. Bilodeau, Management Tools and Trends 2009 (Boston: Bain & Company, 2009). 10. P. Light, Pathways to Nonprofit Excellence (Washington, DC: Brookings Institution Press, 2002). 11. Ibid. 12. S. J. Wiener, A. D. Kirsch, and M. T. McCormack, Balancing the Scales: Measuring the Roles and Contributions of Nonprofit Organizations and Religious Congregations (Washington, DC: Independent Sector, 2002), 68. 13. 2005 MSO Benchmarking Survey Results (Washington, DC: Alliance for Nonprofit Management, 2005). 14. Wiener, Kirsch, and McCormack, 2002, p. 2. 15. Ibid., p. 26. 16. P. Light, Sustaining Innovation: Creating Nonprofit and Government Organizations that Innovate Naturally, 1st ed. (San Francisco: Jossey-Bass, 1998), 16. 17. R. S. Kaplan and D. P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74(1) (1996): 82. 18. K. M. Hopkins and C. Hyde, “The Human Service Managerial Dilemma: New Expectations, Chronic Challenges and Old Solutions,” Administration in Social Work 26(3): 11. 19. Ibid. 20. H. Mintzberg, “The Fall and Rise of Strategic Planning,” Harvard Business Review 72(1) (1994): 324. 21. H. Mintzberg, The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning, Plans, Planners (New York: Free Press, 1994), 111. 22. D. Lovallo and D. Kahneman, “Delusions of Success: How Optimism Undermines Executives’ Decisions,” Harvard Business Review 81(7): 57. 23. K. Wing, K. L. Roeger, and T. Pollak, The Nonprofit Sector in Brief: Pubic Charities, Giving, and Volunteering, 2009 (Washington, DC: Urban Institute, 2010). 24. C. Yoshioka and R. Ashcraft, Arizona Giving and Volunteering (Phoenix: ASU Lodestar Center for Philanthropy & Nonprofit Innovation, 2008). This study of operating nonprofit organizations in Arizona found that 54 percent of the estimated 39,600 agencies operating in the state were not listed in the National Center for Charitable Statistics database. The estimate included viable agencies only. Applying the ratio found in Arizona nationally yields a field of just over 3 million. 25. Wiener, Kirsch, and McCormack, 2002, p. 66. 26. T. Wolfred, M. Allison, and J. Masaoka, Leadership Lost: A Study on Executive Director Tenure and Experience (San Francisco: CompassPoint Nonprofit Services, 1999).

Chapter = c01

Date: Dec 13, 2010

252

Time: 12:12 pm

Notes

27. J. M. Bryson, Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, rev. ed. (San Francisco: Jossey-Bass, 1995). 28. M. Allison and J. Kaye, Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook (New York: John Wiley & Sons, 1997), 52–53. 29. B. W. Barry, Strategic Planning Workbook for Nonprofit Organizations (St. Paul, MN: Amherst H. Wilder Foundation, 1997). 30. R. Bradford, J. P. Duncan, and B. Tarcy, Simplified Strategic Planning: A No-Nonsense Guide for Busy People Who Want Results Fast! 1st ed. (Worcester, MA: Chandler House Press, 2000), 30–31. 31. J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies, 1st ed. (New York: HarperBusiness, 1994), 9. 32. C. R. Schwenk and C. B. Shrader, “Effects of Formal Strategic Planning on Financial Performance in Small Firms: A Meta-analysis,” Entrepreneurship Theory and Practice 17(3) (1993): 60. 33. A. Bhide, “How Entrepreneurs Craft Strategies that Work,” Harvard Business Review 72(2) (1994): 150. 34. Ibid., p. 152. 35. Mintzberg, “The Fall and Rise of Strategic Planning,” 1994, p. 342. 36. H. Mintzberg, “Patterns in Strategy Formation,” Management Science, 24(9) (1978): 943. 37. J. A. Kay, Why Firms Succeed (New York: Oxford University Press, 1995), 266. 38. B. K. Boyd, “Strategic Planning and Financial Performance: A Meta-analytic Review,” Journal of Management Studies 28(4) (1991): 369. 39. N. Capon, J. U. Farley, and J. M. Hulbert, “Strategic Planning and Financial Performance: More Evidence,” Journal of Management Studies 31(1) (1994): 109–110. 40. C. Miller and L. Cardinal, “Strategic Planning and Firm Performance: A Synthesis of More,” Academy of Management Journal 37(6) (1994): 1662. 41. M. M. Stone, B. Bigelow, and W. Crittenden, “Research on Strategic Management in Nonprofit Organizations,” Administration & Society 31(3) (1999): 391. 42. Light, 2002. 43. Stone, Bigelow, and Crittenden, 1999, p. 391. 44. R. Herman and D. Renz, “Theses on Nonprofit Organizational Effectiveness,” Nonprofit and Voluntary Sector Quarterly 28(2) (1999): 117. 45. J. I. Siciliano, “The Relationship between Formal Planning and Performance in Nonprofit Organizations,” Nonprofit Management and Leadership 7(4): 387. 46. Stone, Bigelow and Crittenden, 1999, p. 391. 47. Mintzberg, “The Fall and Rise of Strategic Planning,” 1994, p. 333. 48. D. Myers and A. Kitsuse, “Constructing the Future in Planning: A Survey of Theories and Tools,” Journal of Planning Education and Research 19 (2000): 221. 49. Mintzberg, “The Fall and Rise of Strategic Planning,” 1994, p. 379. 50. Collins and Porras, 1994, p. 9. 51. L. Bossidy, R. Charan, and C. Burck, Execution: The Discipline of Getting Things Done, 1st ed. (New York: Crown Business, 2002), 15. 52. Mintzberg, “The Fall and Rise of Strategic Planning,” 1994, p. 393. 53. L. D. Goodstein, T. M. Nolan, and J. W. Pfeiffer, Applied Strategic Planning: A Comprehensive Guide (New York: McGraw-Hill, 1993), 4–5. 54. E. D. Beinhocker and S. Kaplan, “Tired of Strategic Planning” [electronic version], McKinsey Quarterly, 2002 Special Edition: Risk and Resilience, 51. Retrieved September 21, 2007, from www.mckinseyquarterly.com/Strategy/Strategic Thinking/ Tired of strategic planning 1191#top.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

253

55. Allison and Kaye, 1997, pp. 7–8. 56. J. M. Bryson and F. K. Alston, Creating and Implementing Your Strategic Plan: A Workbook for Public and Nonprofit Organizations, 1st ed. (San Francisco: Jossey-Bass, 1996). 57. Bryson, 1995, p. 7. 58. Barry, 1997. 59. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994), 29. 60. Quoted in M. Walton, The Deming Management Method, 1st ed. (New York: Dodd, Mead, 1986), 55. 61. H. Gardner and E. Laskin, Leading Minds: An Anatomy of Leadership (New York: BasicBooks, 1995), 43. 62. “Raising Money: Tips for Start-up Organizations,” Board Member, May 2000: 5. 63. D. Rigby and B. Bilodeau, Management Tools and Trends 2009 (Boston: Bain & Company, 2009). 64. Light, 2002. 65. 2005 MSO Benchmarking Survey Results, 2005. 66. Stone, Bigelow, and Crittenden, 1999, p. 409. 67. Ibid. 68. L. R. Frank, Random House Webster’s Quotationary (New York: Random House, 2001), 833. 69. W. F. Crittenden, V. L. Crittenden, M. M. Stone, and C. J. Robertson, “An Uneasy Alliance: Planning and Performance in Nonprofit Organizations,” International Journal of Organizational Theory and Behavior 6(4) (2004): 99. 70. W. E. Crittenden, V. L. Crittenden, and T. G. Hunt, “Planning and Stakeholder Satisfaction in Religious Organizations,” Journal of Voluntary Action Research 17 (1988): 68. 71. S. R. Covey, The Seven Habits of Highly Effective People: Restoring the Character Ethic (New York: Simon & Schuster, 1989), 76. 72. Light, 1998. p. 23. 73. Herman and Renz, 1999, p. 117. 74. Ibid., p. 123. 75. Mintzberg, The Rise and Fall of Strategic Planning, 1994, pp. 415–416. 76. M. E. Porter, “Corporate Strategy: The State of Strategic Thinking,” The Economist, 303 (May 23, 1987): 18.

Chapter 3 1. P. F. Drucker, Managing the Non-profit Organization (New York: HarperCollins, 1990), 152. 2. H. Mintzberg, “The Fall and Rise of Strategic Planning,” Harvard Business Review 72(1) (1994): 107. 3. J. Carver and M. M. Carver, Reinventing Your Board: A Step-by-Step Guide to Implementing Policy Governance (San Francisco: Jossey-Bass, 1997), 30. 4. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994), 29. 5. J. Carver, Boards that Make a Difference (San Francisco: Jossey-Bass, 1997). 6. J. L. Brudney and P. D. Nobbie, “Training Policy Governance in Nonprofit Boards of Directors,” Nonprofit Management & Leadership 12(4) (2002): 387; C. Oliver and M. Conduff, The Policy Governance Fieldbook: Practical Lessons, Tips, and Tools from the Experience of Real-World Boards, 1st ed. (San Francisco: Jossey-Bass, 1999);

Chapter = c01

Date: Dec 13, 2010

254

Time: 12:12 pm

Notes

7. 8. 9.

10. 11. 12. 13. 14.

P. D. Nobbie and J. L. Brudney, “Testing the Implementation, Board Performance, and Organizational Effectiveness of the Policy Governance Model in Nonprofit Boards of Directors,” Nonprofit and Voluntary Sector Quarterly 32(4) (2003): 571. S. R. Covey, The Seven Habits of Highly Effective People: Restoring the Character Ethic (New York: Simon & Schuster, 1989), 70–71. Drucker, 1990, p. 152. A. Anthony, “How to Kill Innovation: Keep Asking Questions.” Retrieved March 1, 2010, from www.bloomberg.com/apps/harvardbusiness?sid=Hdce46ee0bd8fdb46e5b60dd4 1038aacf. The General’s actual quote was “No plan of battle ever survives contact with the enemy.” A. Hill and J. Wooden, Be Quick—But Don’t Hurry: Learning Success from the Teachings of a Lifetime (New York: Simon & Schuster, 2001), 72. H. Mintzberg, B. W. Ahlstrand, and J. Lampel, Strategy Safari: A Guided Tour through the Wilds of Strategic Management (New York: Free Press, 1998), 11. L. R. Frank, Random House Webster’s Quotationary (New York: Random House, 2001), 791. T. J. Peters and R. H. Waterman, In Search of Excellence: Lessons from America’s Best-Run Companies, 1st ed. (New York: Harper & Row, 1982), 13. Beinhocker and Kaplan, 2002, p. 53; emphasis in the original.

Part II 1. 2. 3. 4.

C. Crowe, Jerry Maguire (London: Faber and Faber, 1998), 34–36. Ibid., p. 34. Ibid., p. 38. D. H. Pink, Drive: The Surprising Truth about What Motivates Us (New York: Riverhead Books, 2009), 204.

Chapter 4 1. D. Crary, “Students Lie, Cheat, Steal, but Say They’re Good [electronic version], from www.google.com/hostednews/ap/article/ALeqM5i8Qc-a2ZdwcbZ5BKwfdwWj33bi AD94PGCAO8, 2008; “Josephson Institute’s report card on American youth: There’s a Hole in the Moral Ozone and It’s Getting Bigger” [electronic version], 3, from http:// charactercounts.org/programs/reportcard/2008/index.html. 2. R. Dawkins, The Selfish Gene, new ed. (New York: Oxford University Press, 1989); R. Shorrock, “Richard Dawkins: An Argument for Atheism.” In A. Salit and P. Myers (Producer), Fresh Air from WHYY (United States: National Public Radio, 2007). 3. J. Ciulla, “Leadership Ethics: Mapping the Territory,” Business Ethics Quarterly 5(5–28) (1995): 5. 4. L. K. Trevi˜no and K. A. Nelson, Managing Business Ethics: Straight Talk about How to Do It Right, 4th ed. (Hoboken, NJ: John Wiley & Sons, 2007), xv. 5. B. George, Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value, 1st ed. (San Francisco: Jossey-Bass, 2003), 1. 6. T. M. Jones, “Ethical Decision Making by Individuals in Organizations: An IssueContingent Model,” Academy of Management Review 16(2) (1991): 366. 7. National Business Ethics Survey: An Inside View of Private Sector Ethics (Arlington, VA: Ethics Resource Center, 2007), v. 8. National Business Ethics Survey: Ethics in the Recession (Arlington, VA: Ethics Resource Center, 2009), 10.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

255

9. R. E. Freeman and L. Stewart, Developing Ethical Leadership (Charlottesville, VA: Business Roundtable Institute for Corporate Ethics, 2006), 2. 10. J. Badaracco, Leading Quietly: An Unorthodox Guide to Doing the Right Thing (Boston: Harvard Business School Press, 2002), 35. 11. “100 Most Influential in Business Ethics.” Retrieved December 1, 2008, from http://ethisphere.com/influential/. 12. Freeman and Stewart, 2006, p. 2. 13. L. K. Trevi˜no and M. E. Brown, “Managing to Be Ethical: Debunking Five Business Ethics Myths, Academy of Management Executive 18(2) (2004): 71–72. 14. National Business Ethics Survey: An Inside View of Private Sector Ethics, 2007, p. 9. 15. Ibid. 16. K. S. Cameron and R. E. Quinn, Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework (Reading, MA: Addison-Wesley, 1999), 14. 17. E. H. Schein, The Corporate Culture Survival Guide: Sense and Nonsense about Culture Change, 1st ed. (San Francisco: Jossey-Bass, 1999). 18. J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies, 1st ed. (New York: HarperBusiness, 1994), 71. 19. G. Yukl, Leadership in Organizations, 6th ed. (Upper Saddle River, NJ: Pearson/Prentice Hall, 2006), 291–292. 20. S. Harter, “Authenticity.” In C. R. Snyder and S. J. Lopez, eds., Handbook of Positive Psychology (Oxford: Oxford University Press, 2002), 382. 21. F. Luthans and B. J. Avolio, “Authentic Leadership: A Positive Developmental Approach.” In K. S. Cameron, J. E. Dutton, and R. E. Quinn, eds., Positive Organizational Scholarship (San Francisco: Berrett-Koehler, 2003), 242; italics removed. 22. B. J. Avolio, W. L. Gardner, F. O. Walumbwa, F. Luthans, and D. R. May, “Unlocking the Mask: A Look at the Process by Which Authentic Leaders Impact Follower Attitudes and Behaviors,” Leadership Quarterly 15(6) (2004): 802. 23. Luthans and Avolio, 2003, pp. 248–249. 24. J. H. Davis, F. D. Schoorman, R. C. Mayer, and H. H. Tan, “The Trusted General Manager and Business Unit Performance: Empirical Evidence of a Competitive Advantage,” Strategic Management Journal 21(5) (2000): 563–576. 25. L. Huff and L. Kelley, “Levels of Organizational Trust in Individualist versus Collectivist Societies: A Seven-Nation Study,” Organization Science 14(1) (2003): 81–90. 26. J. M. Kouzes and B. Z. Posner, The Leadership Challenge, 3rd ed. (San Francisco: JosseyBass, 2002), 14. 27. Collins and Porras, 1994, p. 73. 28. J. Winokur, Friendly Advice (New York: Plume, 1992), 194. 29. Collins and Porras, 1994, p. 73.

Chapter 5 1. P. F. Drucker, “What Business Can Learn from Nonprofits,” Harvard Business Review 67(4) (1989): 89. 2. Ibid. 3. P. Light, Sustaining Innovation: Creating Nonprofit and Government Organizations that Innovate Naturally, 1st ed. (San Francisco: Jossey-Bass, 1998), 254–255. 4. C. E. Larson and F. M. J. LaFasto, Teamwork: What Must Go Right, What Can Go Wrong (Newbury Park, CA: Sage, 1989), 27. 5. C. K. Bart, “Sex, Lies, and Mission Statements,” Business Horizons 40(6) (1997): 9. 6. J. A. Phills, “The Sound of Music,” Stanford Social Innovation Review 2(2) (2004): 52.

Chapter = c01

Date: Dec 13, 2010

256

Time: 12:12 pm

Notes

7. V. K. Rangan, “Lofty Missions, Down-to-Earth Plans,” Harvard Business Review 82(3) (2004): 112, 114. 8. Forest David and Fred David, “It’s Time to Redraft Your Mission Statement,” Journal of Business Strategy 24(1) (2003): 11. 9. J. A. Pearce II, “The Company Mission as a Strategic Tool,” Sloan Management Review 23(3) (1982): 15. 10. M. Allison and J. Kaye, Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook (New York: John Wiley & Sons, 1997), 57. 11. J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies, 1st ed. (New York: HarperBusiness, 1994). 12. D. Rigby and B. Bilodeau, Management Tools and Trends 2009 (Boston: Bain & Company, 2009). 13. B. Bartkus, M. Glassman, and B. McAfee, “Mission Statement Quality and Financial Performance,” European Management Journal 24(1) (2006), 86–94; J. A. Pearce II and F. David, “Corporate Mission Statements: The Bottom Line,” Academy of Management Executives 1(2) (1987): 109–115; M. C. Baetz and C. K. Bart, “Developing Mission Statements Which Work,” Long Range Planning 29(4) (1996): 526–533; C. K. Bart and M. C. Baetz, “The Relationship between Mission Statements and Firm Performance: An Exploratory Study,” Journal of Management Studies 35(6) (1998): 823–853; Pearce, 1982. 14. Phills, 2004, p. 52. 15. P. Sellers and E. Gustafson, “Most Powerful Women Entrepreneurs: Susan Walvius and Michelle Marciniak.” Retrieved December 18, 2009, from http://money.cnn.com/ galleries/2009/fortune/0912/gallery.most powerful women entrepreneurs.fortune/ index.html. 16. Quoted in K. Blanchard and S. Bowles, Raving Fans: A Revolutionary Approach to Customer Service, 1st ed. (New York: Morrow, 1993), ix–x. 17. P. F. Drucker and J. C. Collins, The Five Most Important Questions You Will Ever Ask about Your Organization, new ed. (San Francisco: Leader to Leader Institute; Jossey-Bass, 2008), p. 2. 18. Ibid., p. 23. 19. Ibid. 20. Ibid., p. 25. 21. Ibid., p. 26. 22. Numbers in parentheses are results of a multivoting rating process where participants could vote $3, $2, and $1 in any combination for their highest-rated grouping of ideas; higher numbers = higher rating. 23. Pearce and David, 1987, p. 109. 24. D. La Piana, The Nonprofit Strategy Revolution (St. Paul, MN: Fieldstone Alliance, 2008). 25. Porter, 1996, p. 62. 26. D. La Piana and M. Hayes, Play to Win: The Nonprofit Guide to Competitive Strategy, 1st ed. (San Francisco: Jossey-Bass, 2005), 22. 27. T. O. Jones and W. E. Sasser Jr., “Why Satisfied Customers Defect,” Harvard Business Review 73(6) (1995): 89; italics removed. 28. F. F. Reichheld, Loyalty Rules!: How Today’s Leaders Build Lasting Relationships (Boston: Harvard Business School Press, 2001), 2. 29. La Piana, 2008, p. 36. 30. M. A. Hitt, R. D. Ireland, and R. E. Hoskisson, Strategic Management: Competitiveness and Globalization: Concepts & Cases, 8th ed. (Mason, OH: South-Western, 2009). 31. D. H. Pink, Drive: The Surprising Truth about What Motivates Us (New York: Riverhead Books, 2009), 154–155. 32. J. Carver and M. M. Carver, Reinventing Your Board: A Step-by-Step Guide to Implementing Policy Governance (San Francisco: Jossey-Bass, 1997), 144.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

257

33. C. Finney, “Mission Haiku: The Poetry of Mission Statements” [electronic version], 15. Retrieved April 6, 2008, from www.nonprofitquarterly.org/index.php?option=com jcs &view=jcs&layout=form&Itemid=131. 34. P. F. Drucker, The Drucker Foundation Self-Assessment Tool: Participant Workbook (San Francisco: Drucker Foundation, Jossey-Bass Publishers, 1999), 20. 35. Collins and Porras, 1994, p. 9. 36. “Muggsy Bogues.” Retrieved March 8, 2010, from www.nba.com/playerfile/muggsy bogues/bio.html.

Part III 1. M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors: With a New Introduction, 1st Free Press ed. (New York: Free Press, 1998). 2. M. A. Hitt, R. D. Ireland, and R. E. Hoskisson, Strategic Management: Competitiveness and Globalization: Concepts & Cases, 8th ed. (Mason, OH: South-Western, 2009), 4. 3. D. La Piana and M. Hayes, Play to Win: The Nonprofit Guide to Competitive Strategy, 1st ed. (San Francisco: Jossey-Bass, 2005), xx. 4. H. Mintzberg, “The Fall and Rise of Strategic Planning,” Harvard Business Review 72(1) (1994): 107. 5. Powering Social Change: Lessons on Community Wealth Generation for Nonprofit Sustainability (Washington, DC: Community Wealth Ventures, 2003). 6. Porter, 1998, p. xxviii.

Chapter 6 1. M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors: With a New Introduction, 1st Free Press ed. (New York: Free Press, 1998). 2. R. D. Shriner, “How Alike Are Nonprofits and For-Profit Businesses?” Retrieved December 31, 2005, from www.nonprofits.org/npofaq/18/82.html. 3. G. Mandler, “Organization and Memory.” In K. W. Spence and J. T. Spence, eds., Psychology of Learning and Motivation, Vol. 1 (New York: Academic Press, 1967), 327–372; G.A. Miller, “The Magical Number Seven, Plus or Minus Two: Some Limits on Our Capacity for Processing Information,” The Psychological Review 63 (1956): 81–97 4. C. Miller, “Truth or Consequences: The Implications of Financial Decisions,” Nonprofit Quarterly 15(2) (2008): 10–17.

Chapter 7 1. R. S. Kaplan and D. P. Norton, “The Balanced Scorecard: Measures that Drive Performance,” Harvard Business Review 70(1) (1992): 71. 2. M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors: With a New Introduction, 1st Free Press ed. (New York: Free Press, 1998), xxviii. 3. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994), 9. 4. J. C. Collins, Good to Great and the Social Sectors: A Monograph to Accompany Good to Great (Boulder, CO: Author, 2005), 5. 5. M. E. Porter and M. R. Kramer, “Philanthropy’s New Agenda: Creating Value,” Harvard Business Review 77(6) (1999): 124. 6. R. E. Herzlinger, “Can Public Trust in Nonprofits and Governments Be Restored?” Harvard Business Review 74(2) (1996): 99.

Chapter = c01

Date: Dec 13, 2010

258

Time: 12:12 pm

Notes

7. R. M. Kanter and D. V. Summers, “Doing Well While Doing Good: Dilemmas of Performance Measurement in Nonprofit Organizations and the Need for a MultipleConstituency Approach.” In W. W. Powell, ed., The Nonprofit Sector: A Research Handbook (New Haven, CT: Yale University Press, 1987), 154. 8. P. F. Drucker, “What Business Can Learn from Nonprofits,” Harvard Business Review 67(4) (1989): 89. 9. Y. Baruch and N. Ramalho, “Communalities and Distinctions in the Measurement of Organizational Performance and Effectiveness across For-Profit and Nonprofit Sectors,” Nonprofit and Voluntary Sector Quarterly 35(1) (2006): 39–65; J. Masaoka, “Alligators in the Sewer: Myths and Urban Legends about Nonprofits,” CompassPoint Board Cafe, July 2005: 1–2. 10. L. Silverman and L. Taliento, “What Business Execs Don’t Know—but Should—about Nonprofits,” Stanford Social Innovation Review, 2006: 39. 11. B. A. Weisbrod, “An Agenda for Quantitative Evaluation of the Nonprofit Sector.” In P. Flynn and V. A. Hodgkinson, eds., Measuring the Impact of the Nonprofit Sector (New York: Kluwer Academic/Plenum, 2002), 275. 12. S. Kerr, “On the Folly of Rewarding A, While Hoping for B,” Academy of Management Journal 18(4) (1975): 769–783. 13. “The Sector’s Future Depends on Boards,” Board Member 4 (January 1996): 10. 14. D. Renz and R. Herman, “More Theses on Nonprofit Organizational Effectiveness,” ARNOVA News 33 (Fall 2004): 10. 15. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994), 127. 16. Porter, 1998, p. xxviii. 17. J. S. Livingston, “Pygmalion in Management,” Harvard Business Review 66(5) (1988): 126. 18. H. Hatry, T. Houten, M. Plantz, and M. Taylor. Measuring Program Outcomes: A Practical Approach (Washington: United Way of America, 1996). 19. L. M. Salamon, S. L. Geller, et al., “Nonprofits, Innovation, and Performance Measurement: Separating Fact from Fiction.” Listening Post Project (Baltimore, MD: Johns Hopkins University Center for Civil Society Studies, 2010), 23. 20. C. Miller, “The Four Horsemen of the Nonprofit Financial Apocalypse,” Nonprofit Quarterly 17(1) (2010): 24. 21. T. McLaughlin, “Financial Management.” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 255. 22. K. A. Froelich, T. W. Knoepfle, and T. H. Pollak, “Financial Measures in Nonprofit Organization Research: Comparing IRS 990 Return and Audited Financial Statement Data,” Nonprofit and Voluntary Sector Quarterly 29(2) (2000): 251. 23. L. R. Frank, Random House Webster’s Quotationary (New York: Random House, 2001), 791. 24. Porter, 1998, p. xxviii.

Chapter 8 1. C. Crowe, Jerry Maguire (London: Faber and Faber, 1998), 38. 2. W. G. Bennis and B. Nanus, Leaders: Strategies for Taking Charge, 2nd ed. (New York: HarperBusiness, 1997), 17; S. R. Covey, The Seven Habits of Highly Effective People: Restoring the Character Ethic (New York: Simon & Schuster, 1989), 101; M. De Pree, Leadership Is an Art (New York: Doubleday, 1989), 9; J. Kotter, A Force for Change: How Leadership Differs from Management (New York: Free Press, 1990), 5; J. Collins and J. Porras, “Organizational Vision and Visionary Organizations,” California Management

Chapter = c01

Date: Dec 13, 2010

Notes

3.

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

16.

17. 18. 19. 20. 21. 22. 23. 24. 25.

26.

Time: 12:12 pm

259

Review, 34(1) (1991), 30; J. M. Kouzes and B. Z. Posner, The Leadership Challenge: How to Keep Getting Extraordinary Things Done in Organizations, 2nd ed. (San Francisco: Jossey-Bass, 1995), 95; P. M. Senge, The Fifth Discipline: The Art and Practice of the Learning Organization, 1st ed. (New York: Doubleday/Currency, 1990), 206. Y. Berson, B. Shamir, B. J. Avolio, and M. Popper, “The Relationship between Vision Strength, Leadership Style, and Context,” Leadership Quarterly 12(1) (2001): 54; J. W. Gardner, On Leadership (New York: Free Press, 1990), 130; M. Sashkin, “Visionary Leadership.” In J. T. Wren, ed. The Leader’s Companion: Insights on Leadership through the Ages (New York: Free Press, 1995), 403; J. A. Conger, The Charismatic Leader: Behind the Mystique of Exceptional Leadership, 1st ed. (San Francisco: Jossey-Bass, 1989), 29; N. M. Tichy and M. A. Devanna, “The Transformational Leader,” Training and Development Journal 40(7) (1986): 28. W. G. Bennis, On Becoming a Leader (Reading, PA: Addison-Wesley, 1989), 194. P. B. Vaill, “Visionary Leadership.” In A. R. Cohen, ed., The Portable MBA in Management, 2nd ed. (New York: John Wiley & Sons, 2002), 18. Senge, 1990, p. 206. Vaill, 2002, p. 28. G. Yukl, Leadership in Organizations, 5th ed. (Upper Saddle River, NJ: Prentice Hall, 2002), 283. L. Larwood, C. M. Falbe, P. Miesing, and M. P. Kriger, “Structure and Meaning of Organizational Vision,” Academy of Management Journal 38(3) (1995): 740–769. Bennis and Nanus, 1997. Kotter, 1990, p. 68. H. Mintzberg, The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning, Plans, Planners (New York: Free Press, 1994). J. M. Strange and M. D. Mumford, “The Origins of Vision: Charismatic versus Ideological Leadership,” Leadership Quarterly 13(4) (2002): 343. B. Nanus, Visionary Leadership: Creating a Compelling Sense of Direction for Your Organization, 1st ed. (San Francisco: Jossey-Bass, 1992), 8. R. Awamleh and W. L. Gardner, “Perceptions of Leader Charisma and Effectiveness: The Effects of Vision Content, Delivery, and Organizational Performance,” Leadership Quarterly 10(3) (1999): 359. J. R. Baum, E. A. Locke, and S. A. Kirkpatrick, “A Longitudinal Study of the Relation of Vision and Vision Communication to Venture Growth in Entrepreneurial Firms,” Journal of Applied Psychology 83(1) (1998): 52. Kotter, 1990. Mintzberg, The Rise and Fall of Strategic Planning, 1994, p. 293. L. Korn, “How the Next CEO Will Be Different,” Fortune 119 (May 22, 1989): 157. Nanus, 1992; J. Kotter, Leading Change (Boston: Harvard Business School Press, 1996); Larwood, Falbe, Miesing, and Kriger, 1995. W. G. Bennis and R. J. Thomas, The Alchemy of Leadership,” CIO 16 (December 2002). D. Rigby, Management Tools 2003 (Boston: Bain & Company, 2003); D. Rigby and B. Bilodeau, Management Tools and Trends 2009 (Boston: Bain & Company, 2009). B. M. Bass and R. M. Stogdill, Bass & Stogdill’s Handbook of Leadership: Theory, Research, and Managerial Applications, 3rd ed. (New York: Free Press, 1990). A. E. Rafferty and M. A. Griffin, “Dimensions of Transformational Leadership: Conceptual and Empirical Extensions,” Leadership Quarterly 15(3) (2004): 348. B. Shamir, E. Zakay, E. Breinin, and M. Popper, “Correlates of Charismatic Leader Behavior in Military Units: Subordinates’ Attitudes, Unit Characteristics, and Superiors’ Appraisals of Leader Performance,” Academy of Management Review 41(4) (1998): 400. “All in a Day’s Work,” Harvard Business Review 79(11) (2001): 58.

Chapter = c01

Date: Dec 13, 2010

260

Time: 12:12 pm

Notes

27. N. M. Tichy and E. B. Cohen, The Leadership Engine: How Winning Companies Build Leaders at Every Level, 1st ed. (New York: HarperBusiness, 1997), 173. 28. Bennis and Nanus, 1997; Tichy and Cohen, 1997, p. 173; J. Kotter, “Leadership Engine,” Executive Excellence 17 (April 2000); M. Wheatley, Leadership and the New Science: Discovering Order in a Chaotic World, 2nd ed. (San Francisco: Berrett-Koehler, 1999), 95; P. B. Crosby, Quality Is Free: The Art of Making Quality Certain (New York: McGraw-Hill, 1979), 66. 29. R. A. Heifetz, Leadership without Easy Answers (Boston: Belknap Press of Harvard University Press, 1994), 24. 30. Mintzberg, The Rise and Fall of Strategic Planning, 1994. 31. BrainyQuote, from www.brainyquote.com, 2001–2010. 32. J. A. Conger, The Charismatic Leader: Behind the Mystique of Exceptional Leadership, 1st ed. (San Francisco: Jossey-Bass, 1989), 38; Kouzes and Posner, 1995, p. 119; Senge, 1990, p. 208. 33. H. Gardner and E. Laskin, Leading Minds: An Anatomy of Leadership (New York: Basic Books, 1995), 11. 34. R. J. House and B. Shamir, “Toward the Integration of Transformational, Charismatic, and Visionary Theories.” In M. Chemers and R. Ayman, eds., Leadership Theory and Research: Perspectives and Directions (San Diego: Academic Press, 1993), 97. 35. BrainyQuote, 2001–2010. 36. Larwood, Falbe, Miesing, and Kriger, 1995; Yukl, 2002, p. 283. 37. J. V. Quigley, Vision: How Leaders Develop It, Share It, and Sustain It (New York: McGraw-Hill, 1993), xiii. 38. Yukl, 2002. 39. A. E. Guskin, Notes from a Pragmatic Idealist: Selected Papers 1985–1997 (Yellow Springs, OH: Antioch University, 1997). 40. W. G. Rowe, “Creating Wealth in Organizations: The Role of Strategic Leadership,” Academy of Management Executive 15(1): 82 (2001). 41. J. C. Collins and J. I. Porras, “Building Your Company’s Vision,” Harvard Business Review 74(5) (1996): 73. 42. M. Light, Finding George Bailey: Wonderful Leaders, Wonderful Lives (unpublished PhD, Antioch University, Yellow Springs, OH, 2007). 43. P. Bronson, “What Should I Do with My Life?” Fast Company, January 2003: 75. 44. As cited in H. Arden, S. Wall, and White Deer of Autumn, Wisdomkeepers: Meetings with Native American Spiritual Elders (Hillsboro, OR: Beyond Words, 1990), 14–15. 45. Conger, 1989, p. 66. 46. Nanus, 1992, p. 44. 47. “All in a Day’s Work,” 2001, p. 56. 48. M. A. Hitt, R. D. Ireland, and R. E. Hoskisson, Strategic Management: Competitiveness and Globalization: Concepts & Cases, 8th ed. (Mason, OH: South-Western, 2009), 6. 49. J. M. Bryson, Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, rev. ed. (San Francisco: Jossey-Bass, 1995), 23. 50. P. Tulenko, “Lead Your Own SWOT Team to Success,” Scripps Howard News Service, October 2004. 51. Mintzberg, The Rise and Fall of Strategic Planning, 1994: 279. 52. G. Hamel and C. K. Prahalad, “Strategic Intent,” Harvard Business Review 67(3) (1989): 65. 53. J. M. Bryson, Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, 1st ed. (San Francisco: Jossey-Bass, 1988), 31.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

261

54. Mintzberg, The Rise and Fall of Strategic Planning, 1994. 55. A. Bhide, “How Entrepreneurs Craft Strategies that Work,” Harvard Business Review 72(2) (1994): 150. 56. Ibid., p. 151. 57. T. McLaughlin, “Swat the SWOT,” Nonprofit Times. Retrieved from www.nptimes.com/ Jun02/npt3.html, 2002. 58. M. Buckingham, Go Put Your Strengths to Work: 6 Powerful Steps to Achieve Outstanding Performance (New York: Free Press, 2007). 59. T. Rath, The Clifton Strengthsfinder 2.0 Quickbook (New York: Gallup Press, 2007), 5. 60. Ibid., p. 8. 61. K. Subramaniam, J. Kounios, T. B. Parrish, and M. Jung-Beeman, “Brain Mechanism for Facilitation of Insight by Positive Affect,” Journal of Cognitive Neuroscience 21(3) (2009): 415–432. 62. J. Lehrer, “The Eureka Hunt,” New Yorker 84 (Conde Nast Publications, 2008), 40–45. 63. C. W. Hofer and D. Schendel, Strategy Formulation: Analytical Concepts (St. Paul, MN: West, 1978), 150. 64. McLaughlin, 2002. 65. J. A. Beineke and R. H. Sublett, Leadership Lessons and Competencies: Learning from the Kellogg National Fellowship Program (Battle Creek, MI: W. K. Kellogg Foundation, 2002), 51. 66. M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors: With a New Introduction, 1st Free Press ed. (New York: Free Press, 1998), xxviii. 67. Light, 2007, p. 166; P. Brinckerhoff, Social Entrepreneurship: The Art of Mission-Based Venture Development (New York: John Wiley & Sons, 2000). 68. Brinckerhoff, 2000, p. 32. 69. P. F. Drucker and J. C. Collins, The Five Most Important Questions You Will Ever Ask about Your Organization, new ed. (San Francisco: Leader to Leader Institute, Jossey-Bass, 2008), 2. 70. Ibid., p. 11. 71. P. F. Drucker, The Drucker Foundation Self-Assessment Tool: Participant Workbook (San Francisco: The Drucker Foundation, Jossey-Bass Publishers, 1999), 17. 72. L. M. Salamon, S. L. Geller, and K. L. Mengel, Nonprofits, Innovation, and Performance Measurement: Separating Fact from Fiction (Baltimore: Johns Hopkins University Center for Civil Society Studies, 2010), 11. 73. Ibid., p. 14. 74. Drucker and Collins, 2008, p. 23. 75. Ibid., p. 25. 76. Ibid., p. 28. 77. Ibid., p. 29. 78. K. Majeska, “Understanding and Attracting Your ‘Customers.’ ” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 247. 79. T. J. Peters and R. H. Waterman, In Search of Excellence: Lessons from America’s Best-Run Companies, 1st ed. (New York: Harper & Row, 1982), 156. 80. Buckingham, 2007, p. 6. 81. Rigby and Bilodeau, 2009. 82. J. Saul, Benchmarking for Nonprofits: How to Measure, Manage, and Improve Performance (St. Paul, MN: Amherst H. Wilder Foundation, 2004), 1; italics added. 83. G. J. Stigler, “The Economies of Scale,” Journal of Law and Economics 1 (1958): 58.

Chapter = c01

Date: Dec 13, 2010

262

Time: 12:12 pm

Notes

84. S. M. Oster, Strategic Management for Nonprofit Organizations: Theory and Cases (New York: Oxford University Press, 1995), 42. 85. Bhide, 1994. 86. Salamon, Geller, and Mengel, 2010, p. 3. 87. W. C. Kim and R. Mauborgne, “Blue Ocean Strategy,” Harvard Business Review 82(10) (2004): 80. 88. D. Lovallo and D. Kahneman, “Delusions of Success: How Optimism Undermines Executives’ Decisions,” Harvard Business Review 81(7) (2003): 56. 89. Ibid., p. 60. 90. Adapted from Brinckerhoff, 2000, p. 47. 91. G. J. Wedig, “Risk, Leverage, Donations and Dividends-in-Kind: A Theory of Nonprofit Financial Behavior,” International Review of Economics and Finance 3(3) (1994): 257–278. 92. L. Wagner and M. Hager, “Board Members Beware! Warning Signs of a Dysfunctional Organization,” Nonprofit World 16(2) (1998): 18–21. 93. P. Brinckerhoff, “Why You Need to Be More Entrepreneurial—and How to Get Started,” Nonprofit World 19(6) (2001): 13. 94. Ibid. 95. C. F. Chang and H. P. Tuckman, “Financial Vulnerability and Attrition as Measures of Nonprofit Performance,” Annals of Public & Cooperative Economics 62(4) (1991): 655. 96. J. M. Trussel, “Revisiting the Prediction of Financial Vulnerability,” Nonprofit Management and Leadership 13(1) (2002): 28. 97. Ibid., pp. 23–24. 98. Nanus, 1992, pp. 8–9. 99. M. Allison and J. Kaye, Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook (New York: John Wiley & Sons, 1997), 73. 100. Bryson, 1995, p. 139. 101. P. F. Drucker, “The Discipline of Innovation,” Harvard Business Review 63(3) (1985): 68. 102. M. E. Porter, What Is Strategy?” Harvard Business Review 74(6) (1996): 61. 103. R. Moyers and K. Enright, A Snapshot of America’s Nonprofit Boards (Washington, DC: National Center for Nonprofit Boards, 1997). 104. T. Holland and M. Blackmon, Measuring Board Effectiveness: A Tool for Strengthening Your Board (Washington, DC: BoardSource, 2000), 7. 105. H. Mintzberg, “The Fall and Rise of Strategic Planning,” Harvard Business Review 72(1) (1994): 114. 106. J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies, 1st ed. (New York: HarperBusiness, 1994), 95–96. 107. Bryson, 1995, p. 139.

Chapter 9 1. L. R. Frank, Random House Webster’s Quotationary (New York: Random House, 2001), 910. 2. C. Crowe, Jerry Maguire (London: Faber and Faber, 1998), 58. 3. A. Bhide, “How Entrepreneurs Craft Strategies that Work,” Harvard Business Review 72(2) (1994): 151. 4. J. Lehrer, “The Eureka Hunt,” New Yorker 84 (2008): 40–45. 5. L. M. Salamon, S. L. Geller, and K. L. Mengel, Nonprofits, Innovation, and Performance Measurement: Separating Fact from Fiction (Baltimore: Johns Hopkins University Center for Civil Society Studies, 2010).

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

263

6. J. A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (New Brunswick, NJ: Transaction Books, 1983). 7. J. G. Dees, “Mastering the Art of Innovation.” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 163–164. 8. Ibid., p. 169. 9. R. Brewster, “Business Planning: What’s in Your Toolbox?” Nonprofit Quarterly 15(3) (2008): 63. 10. Ibid. 11. H. I. Ansoff, “Strategies for Diversification,” Harvard Business Review 35(5) (1957): 113. 12. P. B. Carroll and C. Mui, “7 Ways to Fail Big,” Harvard Business Review 86(9) (2008): 82–91; B. Nolop, “Rules to Acquire By,” Harvard Business Review, 85(9) (2007): 129–139. 13. T. J. Peters and R. H. Waterman, In Search of Excellence: Lessons from America’s Best-Run Companies, 1st ed. (New York: Harper & Row, 1982), 293. 14. S. T. Helm and F. O. Andersson, “Beyond Taxonomy,” Nonprofit Management & Leadership 20(3) (2010): 263. 15. Ibid., p. 263. 16. W. C. Kim and R. Mauborgne, “Blue Ocean Strategy,” Harvard Business Review, 82(10) (2004): 80. 17. P. C. Nutt, “Surprising but True: Half the Decisions in Organizations Fail,” Academy of Management Executive 12(4) (1999): 75. 18. Ibid. 19. M. Light, Finding George Bailey: Wonderful Leaders, Wonderful Lives (unpublished PhD dissertation, Antioch University, Yellow Springs, OH, 2007). 20. J. S. Hammond, R. L. Keeney, and H. Raiffa, “The Hidden Traps in Decision Making,” Harvard Business Review 76(5) (1998): 47–58. 21. M. Gladwell, Blink: The Power of Thinking without Thinking, 1st ed. (New York: Little Brown, 2005). 22. H. A. Simon, “Making Management Decisions: The Role of Intuition and Emotion,” Academy of Management Executive I (1987): 63. 23. J. Peters, K. Hammond, and D. Summers, “A Note on Intuitive vs. Analytic Thinking,” Organizational Behavior and Human Decision Processes 12(1) (1974): 131; Ibid. 24. D. Leonard and S. Straus, “Putting Your Company’s Whole Brain to Work [article],” Harvard Business Review 75(4) (1997): 113. 25. T. Gilovich, How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life (New York: Free Press, 1991), 9. 26. A. Dijksterhuis, M. W. Bos, L. F. Nordgren, and R. B. van Baaren, “On Making the Right Choice: The Deliberation-without-Attention Effect,” Science 311 (February 17, 2006): 1007. 27. A. Dijksterhuis, “The HBR LIST: Breakthrough Ideas for 2007: When to Sleep on It,” Harvard Business Review 85(2) (2007): 32. 28. Leonard and Straus, 1997, p. 121. 29. Simon, 1987. 30. V. H. Vroom and P. W. Yetton, Leadership and Decision-Making (Pittsburgh: University of Pittsburgh Press, 1973). 31. G. Yukl, Leadership in Organizations, 7th ed. (Upper Saddle River, NJ: Prentice Hall, 2010), 98. 32. J. Kotter, “What Leaders Really Do.” In J. P. Kotter, ed., John P. Kotter on What Leaders Really Do (Boston: Harvard Business School Press, 1999), 45.

Chapter = c01

Date: Dec 13, 2010

264

Time: 12:12 pm

Notes

33. D. Meehan and E. Arrick, Leadership Development Programs: Investing in Individuals (New York: Ford Foundation, 2004); C. Reinelt, P. Foster, and S. Sullivan, Evaluating Outcomes and Impacts: A Scan of 55 Leadership Development Programs (Battle Creek, MI: W. K. Kellogg Foundation, 2002). 34. W. H. Drath, “Changing Our Minds about Leadership,” Issues & Observations 16 (1996): 88–93. 35. Yukl, 2010, p. 116. 36. H. Mintzberg, Structure in Fives: Designing Effective Organizations (Englewood Cliffs, NJ: Prentice-Hall, 1983), 141. 37. Salamon, Geller, and Mengel, 2010, p. 7. 38. B. M. Staw, “Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action,” Organizational Behavior & Human Performance 16(1) (1976): 27–44. 39. M. E. Porter, “What Is Strategy?” Harvard Business Review 74(6) (1996): 70. 40. Abbreviated from B. Hedley, “Strategy and the “Business Portfolio,” Long Range Planning 10(1) (1977): 10–16. 41. R. E. Gruber and M. Mohr, “Strategic Management for Multiprogram Nonprofit Organizations,” California Management Review 24(3) (1982): 17. 42. Adapted from I. C. MacMillan, “Competitive Strategies for Not-for-Profit Organizations,” Advances in Strategic Management 1 (1983): 65–68. 43. Ibid., p. 68. 44. Simon, 1987, p. 57. 45. D. Ulrich, S. Kerr, and R. N. Ashkenas, The GE Work-Out: How to Implement GE’s Revolutionary Method for Busting Bureaucracy and Attacking Organizational Problems—Fast! (New York: McGraw-Hill, 2002), 137. 46. B. Nanus, Visionary Leadership: Creating a Compelling Sense of Direction for Your Organization, 1st ed. (San Francisco: Jossey-Bass, 1992). 47. Porter, 1996, p. 70. 48. P. Brinckerhoff, Social Entrepreneurship: The Art of Mission-Based Venture Development (New York: John Wiley & Sons, 2000), 59; italics removed.

Part IV 1. V. Carucci, “Sudden Impact: Linebackers Pay Immediate Dividends in the NFL” [electronic version]. Retrieved March 29, 2010, from www.nfl.com/draft/story?id= 09000d5d807d12f0&template=with-video&confirm=true. 2. D. Hellriegel and J. Solcum Jr., Organizational Behavior, 13th ed. (Eagan, MN: SouthWestern Cengage Learning, 2009), 192. 3. Ibid., p. 195. 4. L. D. Goodstein, T. M. Nolan, and J. W. Pfeiffer, Applied Strategic Planning: A Comprehensive Guide (New York: McGraw-Hill, 1993), 325. 5. L. Bossidy, R. Charan, and C. Burck, Execution: The Discipline of Getting Things Done, 1st ed. (New York: Crown Business, 2002), 21. 6. M. J. Worth, Nonprofit Management: Principles and Practice (Los Angeles: Sage, 2009), 181. 7. Bossidy, Charan, and Burck, 2002, pp. 227–228. 8. S. J. Wiener, A. D. Kirsch, and M. T. McCormack, Balancing the Scales: Measuring the Roles and Contributions of Nonprofit Organizations and Religious Congregations (Washington, DC: Independent Sector, 2002), 64.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

265

Chapter 10 1. D. Hellriegel and J. Solcum Jr., Organizational Behavior, 13th ed. (Eagan, MN: SouthWestern Cengage Learning, 2009), 195. 2. J. M. Bryson, Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, rev. ed. (San Francisco: Jossey-Bass, 1995), 139. 3. M. Tushman, W. Newman, and D. Nadler, “Executive Leadership and Organizational Evolution: Managing Incremental and Discontinuous Change.” In R. H. Kilmann and T. J. Covin, eds., Corporate Transformation: Revitalizing Organizations for a Competitive World (San Francisco: Jossey-Bass/Pfeiffer, 1988), 111. 4. G. T. Doran, “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives,” Management Review 70(11) (1981): 35. 5. R. Bauer, “SMART Goals Are Out, DUMB Goals Are In” [electronic version]. Retrieved January 27, 2009, from www.evancarmichael.com/Marketing/1160/SMART-Goals-areout-DUMB-Goals-are-in.html. 6. Hellriegel, and Solcum, 2009, p. 195. 7. Ibid. 8. Ibid., pp. 194–195. 9. Ibid., p. 195. 10. J. S. Livingston, “Pygmalion in Management,” Harvard Business Review 47(4) (1969): 81. 11. D. A. Nadler and E. E. L. Lawler III, “Motivation: A Diagnostic Approach.” In J. Osland and M. E. Turner, eds., The Organizational Behavior Reader, 8th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2006), 174. 12. D. Hellriegel, J. W. Slocum, and R. W. Woodman, Organizational Behavior, 5th ed. (St. Paul, MN: West, 1989), 408. 13. Ibid.

Chapter 11 1. W. Thompson, “Ruthless Management, Vintage Melodrama Boost U.K. Theatre.” Retrieved March 3, 2010, from www.bloomberg.com/apps/news?pid=20601088&sid= aihGr2.oQoQk. 2. L. M. Salamon, S. L. Geller, and K. L. Mengel, Nonprofits, Innovation, and Performance Measurement: Separating Fact from Fiction (Baltimore: Johns Hopkins University Center for Civil Society Studies, 2010), 7.

Part V 1. W. G. Bowen, The Board Book: An Insider’s Guide for Directors and Trustees (New York: W.W. Norton & Co., 2008), 4–5. 2. T. Wolfred, M. Allison, and J. Masaoka, Leadership Lost: A Study on Executive Director Tenure and Experience (San Francisco: CompassPoint Nonprofit Services, 1999), 16. 3. B. E. Taylor, R. P. Chait, and T. P. Holland, “The New Work of the Nonprofit Board,” Harvard Business Review 74(5) (1996): 36. 4. R. Chait, W. P. Ryan, and B. E. Taylor, Governance as Leadership: Reframing the Work of Nonprofit Boards (Hoboken, NJ: John Wiley & Sons, 2004), 11. 5. J. Carver, Boards that Make a Difference (San Francisco: Jossey-Bass, 1997), xviii. 6. J. Carver, Boards that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations, 3rd ed. (San Francisco: Jossey-Bass, 2006), xiii.

Chapter = c01

Date: Dec 13, 2010

266

Time: 12:12 pm

Notes

7. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994), 1. 8. J. C. Leifer and M. B. Glomb, The Legal Obligations of Nonprofit Boards (Washington, DC: National Center for Nonprofit Boards, 1995), 5. 9. Nonprofit Governance Index 2007 (Washington, DC: BoardSource, 2007), 4. 10. P. F. Drucker, “What Business Can Learn from Nonprofits,” Harvard Business Review, 67(4), 91. 11. R. Chait, T. Holland, and B. Taylor, Improving the Performance of Governing Boards (Phoenix, AZ: Oryx Press, 1996), 1–2. 12. Chait, Ryan, and Taylor, 2004, p. 11. 13. Bowen, p. 35. 14. K. N. Dayton, Governance Is Governance (Washington, DC: Independent Sector, 2001), 4. 15. Nonprofit Governance Index 2007, p. 4. 16. J. Peters and T. Wolfred, Daring to Lead: Nonprofit Executive Directors and Their Work Experience (San Francisco: CompassPoint Nonprofit Services, 2001), 3. 17. Ibid., p. 6. 18. R. Herman and D. Renz, “Board Practices of Especially Effective and Less Effective Local Nonprofit Organizations,” American Review of Public Administration, 30(2) (2000): 157– 158. 19. Ibid. 20. Bowen, p. 2. 21. Nonprofit Governance Index 2007. 22. R. Moyers and K. Enright, A Snapshot of America’s Nonprofit Boards (Washington, DC: National Center for Nonprofit Boards, 1997), 12. 23. M. Middleton, “Nonprofit Boards of Directors: Beyond the Governance Function.” In W. W. Powell, ed., The Nonprofit Sector: A Research Handbook (New Haven, CT: Yale University Press, 1987), 149. 24. Ibid., p. 150. 25. Nonprofit Governance Index 2007, p. 4. 26. J. R. Katzenbach and D. K. Smith, The Wisdom of Teams: Creating the High-Performance Organization (Boston: Harvard Business School Press, 1993), 45–46. 27. J. Masaoka, “Why Boards Don’t Govern, Part 1,” CompassPoint Board Cafe, October 2004. 28. Nonprofit Governance Index 2007. 29. Ibid. 30. Ibid. 31. L. Fredricks, The Ask: How to Ask Anyone for Any Amount for Any Purpose, 1st ed. (San Francisco: Jossey-Bass, 2006), xv. 32. R. Moyers and K. Enright, A Snapshot of America’s Nonprofit Boards (Washington, DC: National Center for Nonprofit Boards, 1997), 12; Ibid.; Nonprofit Governance Index 2007. 33. Moyers and Enright, 1997. 34. Ibid., p. 4. 35. Nonprofit Governance Index 2007. 36. Moyers and Enright, 1997, p. 12; Ibid. 37. Peters and Wolfred, 2001; “Top Position is One-Time Shot for Many Executive Directors,” Board Member 8 (November/December 1999). 38. Ibid.

Chapter = c01

Date: Dec 13, 2010

Time: 12:12 pm

267

Notes

39. K. Wing, K. L. Roeger, and T. Pollak, The Nonprofit Sector in Brief: Pubic Charities, Giving, and Volunteering, 2009 (Washington, DC: Urban Institute, 2010). 40. S. J. Wiener, A. D. Kirsch, and M. T. McCormack, Balancing the Scales: Measuring the Roles and Contributions of Nonprofit Organizations and Religious Congregations (Washington, DC: Independent Sector, 2002). 41. T. J. Tierney, “The Leadership Deficit,” Stanford Social Innovation Review 4(2) (2006): 26–35. 42. Peters and Wolfred, 2001, p. 13. 43. Bowen, p. 110 44. L. Brenner, “How Does Your Salary Stack Up?” Parade (2008): 8. 45. Peters and Wolfred, 2001. 46. Wing, Roeger, and Pollak, 2010. 47. “United We Stand: How to Make Your Board Work Like a Championship Team,” Board Member, 2000: 3–6. 48. C. E. Larson and F. M. J. LaFasto, Teamwork: What Must Go Right, What Can Go Wrong (Newbury Park, CA: Sage, 1989), 27. 49. L. F. Seltzer, “Human Nature Abhors a Vacuum, Too: Beware! The Need for Stimulation Can Impair Your Judgment,” Blogs: Evolution of the Self: On the Paradoxes of Personality. Retrieved April 27, 2010, from www.psychologytoday.com/blog/evolutionthe-self/200903/human-nature-abhors-vacuum-too.

Chapter 12 1. 2. 3. 4.

5. 6. 7.

8. 9. 10.

11.

12. 13. 14.

C. Crowe, Jerry Maguire (London: Faber and Faber, 1998), 121. Ibid., p. 122. Ibid., p. 122. R. Herman and R. Heimovics, Executive Leadership in Nonprofit Organizations: New Strategies for Shaping Executive-Board Dynamics, 1st ed. (San Francisco: Jossey-Bass, 1991); R. D. Herman and D. Heimovics, “Executive Leadership.” In R. D. Herman, ed., The Jossey-Bass Handbook of Nonprofit Leadership and Management, 2nd ed. (San Francisco: Jossey-Bass, 2005), 153–170. C. O. Houle, Governing Boards: Their Nature and Nurture, 1st ed. (San Francisco: Jossey-Bass, 1989), 88. Ibid., p. 89. R. C. Andringa and T. W. Engstrom, Nonprofit Board Answer Book: Practical Guidelines for Board Members and Chief Executives, 2nd ed. (Washington, DC: Board Source, 2001), 4–5. Ibid., p. 4. Nonprofit Governance Index 2007 (Washington, DC: BoardSource, 2007), 4. Quoted in D. La Piana, Beyond Collaboration: Strategic Restructuring of Nonprofit Organizations (San Francisco: T. J. I. Foundation & N. C. F. N. Boards Document Number, 1998), 13. R. C. Andringa and T. W. Engstrom, Nonprofit Board Answer Book: Practical Guidelines for Board Members and Chief Executives (Washington, DC: National Center for Nonprofit Boards, 1998), 4–5. P. Light, Pathways to Nonprofit Excellence (Washington, DC: Brookings Institution Press, 2002). C. E. Larson and F. M. J. LaFasto, Teamwork: What Must Go Right, What Can Go Wrong (Newbury Park, CA: Sage, 1989). Ibid., pp. 55–56.

Chapter = c01

Date: Dec 13, 2010

268

Time: 12:12 pm

Notes

15. Ibid., p. 108. 16. K. Mathiasen, Board Passages: Three Key Stages in a Nonprofit Board’s Life Cycle (Washington, DC: National Center for Nonprofit Boards, 1999), 17. 17. “The Sector’s Future Depends on Boards,” Board Member 4 (1996): 10. 18. R. T. Ingram, Ten Basic Responsibilities of Nonprofit Boards (Washington, DC: BoardSource, 2003). The 10 responsibilities of nonprofit boards are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

19. 20. 21. 22. 23. 24.

25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

Determine the organization’s mission and purpose. Select the chief executive. Provide proper financial oversight. Ensure adequate resources. Ensure legal and ethical integrity and maintain accountability. Ensure effective organizational planning. Recruit and orient new board members and assess board performance. Enhance the organization’s public standing. Determine, monitor, and strengthen the organization’s programs and services. Support the chief executive and assess his or her performance.

As you read these, you will see more than 10 responsibilities. For example, the ninth is actually three responsibilities because determine, monitor, and strengthen are very different action verbs in their implications. And 5, 7, and 10 are each combinations of two responsibilities. Thus, there are 15 distinct responsibilities. BrainyQuote, from www.brainyquote.com, 2001–2010. J. Carver, Boards that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations, 3rd ed. (San Francisco: Jossey-Bass, 2006), 224. Nonprofit Governance Index 2007 (Washington, DC: BoardSource, 2007). Ibid. Carver, 2006, p. 264. According the U. S. Census Bureau, Earnings in the Past 12 Months (in 2008 InflationAdjusted Dollars), American Community Survey 3-Year Estimates from the American Community Survey, Data Set: 2006–2008, the average income for a full-time, year-around worker is $54,698, which is $26.30 per hour on a 40-hour workweek and $34.19 with a 30 percent benefit rate added (http://factfinder.census.gov). Nonprofit Governance Index 2007. Ibid. Ibid. Ibid. F. W. McFarlan, “Working on Nonprofit Boards: Don’t Assume the Shoe Fits,” Harvard Business Review 77(6) (1999): 74. Ibid. M. Light, Executive Committee (Washington, DC: BoardSource, 2004), xv. McFarlan, 1999, p. 74. Adapted from M. Light, 2004. Nonprofit Governance Index 2007. B. Lawrence, O. Flynn, and K. Fletcher, The Nonprofit Policy Sampler, 2nd ed. (Washington, DC: BoardSource, 2006), 87. Ibid., p. 85. J. R. Hackman, “Creating More Effective Work Groups in Organizations.” In J. R. Hackman, ed., Groups that Work (and Those that Don’t): Creating Conditions for Effective Teamwork, 1st ed. (San Francisco: Jossey-Bass, 1990), 498.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

269

38. J. R. Katzenbach and D. K. Smith, The Wisdom of Teams: Creating the High-Performance Organization (New York: HarperBusiness Essentials, 2003), 139–144. 39. B. Lawrence, O. Flynn, and K. Fletcher, The Nonprofit Policy Sampler, 2nd ed. (Washington, DC: BoardSource, 2006), 20. 40. Nonprofit Governance Index 2007. 41. Katzenbach and Smith, 2003, pp. 85–86. 42. R. L. Gale, Leadership Roles in Nonprofit Governance (Washington, DC: BoardSource, 2003), 5. 43. “The Sector’s Future Depends on Boards,” 1996, p. 10. 44. Larson and LaFasto, 1989, pp. 133–134. 45. J. C. Collins, Good to Great and the Social Sectors: A Monograph to Accompany Good to Great (Boulder, CO: Author, 2005), 15. 46. McFarlan, 1999, p. 80. 47. Katzenbach and Smith, 2003, p. 48. 48. The duty of care requires that directors of a nonprofit organization be reasonably informed about the organization’s activities, participate in decisions, and do so in good faith and with the care of an ordinarily prudent person in similar circumstances. Adapted from B. R. Hopkins, Legal Responsibilities of Nonprofit Boards (Washington, DC: BoardSource, 2003), 3. 49. The American Heritage Dictionary of the English Language, 3rd ed. (Boston: Houghton Mifflin, 1996). 50. Carver, 2006, p. xiii. 51. Herman and Heimovics, 2005, p. 157. 52. K. N. Dayton, Governance Is Governance (Washington, DC: Independent Sector, 2001), 4. 53. R. Heimovics, R. Herman, and C. Jurkiewicz, “The Political Dimension of Effective Nonprofit Executive Leadership,” Nonprofit Management and Leadership 5(3) (1995): 233–248. 54. Herman and Heimovics, 1991, p. 59. 55. Herman and Heimovics, 2005, p. 156. 56. J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies, 1st ed. (New York: HarperBusiness, 1994), 8. 57. Larson and LaFasto, 1989, p. 95. 58. Larson and LaFasto, 1989, p. 134. 59. Quoted in J. A. Kay, Why Firms Succeed (New York: Oxford University Press, 1995), 17. 60. “The duty of loyalty requires board members to exercise their power in the interest of the organization and not in their own interest or the interest of another entity, particularly one in which they have a formal relationship. When acting on behalf of the organization, board members must put the interests of the organization before their personal and professional interests.” Hopkins, 2003, p. 3. 61. “The duty of obedience requires that directors of a nonprofit organization comply with applicable federal, state, and local laws, adhere to the organization’s bylaws, and remain the guardians of the mission. Ibid., p. 4. 62. J. B. Quinn, P. Anderson, and S. Finkelstein, “Managing Professional Intellect: Making the Most of the Best,” Harvard Business Review 74(2) (1996): 75. 63. Carver, 2006, p. 121. 64. “The Standards of Excellence.” Retrieved June 1, 2010, from www.oano.org/Docs/ Complete%20Standards%202009.pdf. 65. “Standards for Charity Accountability.” Retrieved June 1, 2010, from www.bbb.org/us/ Charity-Standards/.

Chapter = c01

Date: Dec 13, 2010

270

Time: 12:12 pm

Notes

Chapter 13 1. M. McCarty, “Schuster Flubbed Open House,” Dayton Daily News, March 5, 2003: B1. 2. BrainyQuote, from www.brainyquote.com, 2001–2010. 3. J. C. Collins, Good to Great: Why Some Companies Make the Leap—and Others Don’t, 1st ed. (New York: HarperBusiness, 2001), 36. 4. M. J. Worth, Nonprofit Management: Principles and Practice (Los Angeles: Sage, 2009), 115. 5. M. Light, Finding George Bailey: Wonderful Leaders, Wonderful Lives (unpublished PhD, Antioch University, Yellow Springs, OH, 2007), 87. 6. Nonprofit Governance Index 2007 (Washington, DC: BoardSource, 2007). 7. S. R. Covey, A. R. Merrill, and R. R. Merrill, First Things First Every Day: Because Where You’re Headed Is More Important than How Fast You’re Going (New York: Simon & Schuster, 1997), 102.

Chapter 14 1. P. M. Jackson, Sarbanes-Oxley for Nonprofit Boards: A New Governance Paradigm (Hoboken, NJ: John Wiley & Sons, 2006), 60. 2. Ibid. 3. T. Holland and M. Blackmon, Measuring Board Effectiveness: A Tool for Strengthening Your Board (Washington, DC: BoardSource, 2000), 7. 4. C. O. Houle, Governing Boards: Their Nature and Nurture, 1st ed. (San Francisco: Jossey-Bass, 1989), xvi. 5. BrainyQuote, from www.brainyquote.com, 2001—2010. 6. A. Korngold, “Amassing Your Governance Capital,” Directors & Boards (third quarter, 2007): 32. 7. A. Korngold, “Bespoke Boards: Find the Nonprofit that Fits,” Directors & Boards (fourth quarter 2007): 36. 8. M. Buckingham and C. Coffman, First, Break All the Rules: What the World’s Greatest Managers Do Differently (New York: Simon & Schuster, 1999). 9. R. Herman and R. Heimovics, Executive Leadership in Nonprofit Organizations: New Strategies for Shaping Executive-Board Dynamics, 1st ed. (San Francisco: Jossey-Bass, 1991), xiii. 10. R. D. Herman and D. Heimovics, “Executive Leadership.” In R. D. Herman, ed., The Jossey-Bass Handbook of Nonprofit Leadership and Management, 2nd ed. (San Francisco: Jossey-Bass, 2005), 153–170. 11. J. Carver, Boards that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations, 3rd ed. (San Francisco: Jossey-Bass, 2006), 189. 12. R. Chait, W. P. Ryan, and B. E. Taylor, Governance as Leadership: Reframing the Work of Nonprofit Boards (Hoboken, NJ: John Wiley & Sons, 2004), 93. 13. Ibid., p. 94. 14. Ibid., p. 94. 15. Herman and Heimovics, 2005. 16. K. N. Dayton, Governance Is Governance (Washington, DC: Independent Sector, 2001), 15. 17. M. Light, The Strategic Board: The Step-by-Step Guide to High-Impact Governance (New York: John Wiley & Sons, 2001), 145. 18. T. Holland, “United We Stand,” Opera in Trust, Summer 2000: 6. 19. Ibid.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

271

20. Quoted in M. Walton, The Deming Management Method, 1st ed. (New York: Dodd, Mead), 94. 21. BrainyQuote, from www.brainyquote.com, 2001–2010.

Appendix A 1. M. Brassard and D. Ritter, The Memory Jogger II (Methuen, MA: GOAL/QPC, 1994), 20.

Appendix B 1. N. H. Borden. “The Concept of the Marketing Mix.” Journal of Advertising Research, 4(June 1964): 7–12. 2. E. J. McCarthy, Basic Marketing: A Managerial Approach, 4th ed. (Homewood, IL: R. D. Irwin, 1971). 3. K. Majeska, “Understanding and Attracting your ‘Customers.’ ” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 202. 4. P. F. Drucker and J. C. Collins, The Five Most Important Questions You Will Ever Ask about Your Organization, new ed. (San Francisco: Leader to Leader Institute, Jossey-Bass, 2008), 25. 5. D. La Piana, The Nonprofit Strategy Revolution (St. Paul, MN: Fieldstone Alliance, 2008), 53. 6. P. Caesar and T. Baker, “Fundamentals of Implementation.” In S. M. Oster, C. W. Massarsky, and S. L. Beinhacker, eds., Generating and Sustaining Nonprofit Earned Income: A Guide to Successful Enterprise Strategies (San Francisco: Jossey-Bass, 2004), 214. 7. R. Kolker, “Homeless Rent Hikes: New City Policy,” New York Magazine. Retrieved from http://nymag.com/news/intelligencer/65757/[5/8/2010. 8. C. Leonard, “Panera to Open More Nonprofit Eateries,” USA Today. Retrieved from www.usatoday.com/money/industries/food/2010-06-27-panera-pay-what-youwish N.htm. 9. P. Brinckerhoff, Social Entrepreneurship: The Art of Mission-Based Venture Development (New York: John Wiley & Sons, 2000), 61. 10. Majeska, 2001, p. 223. 11. K. L. Barker and D. W. Burdick, The NIV Study Bible: New International Version (Grand Rapids, MI: Zondervan Bible, 1985), 994. 12. M. A. Hitt, R. D. Ireland, and R. E. Hoskisson, Strategic Management: Competitiveness and Globalization: Concepts & Cases, 8th ed. (Mason, OH: South-Western, 2009), 36. 13. Ibid., p. 37. 14. M. E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 57(2) (1979): 137–145. 15. S. M. Oster, “Structural Analysis of a Nonprofit Industry,” Strategic Management for Nonprofit Organizations: Theory and Cases (New York: Oxford University Press, 1995), ix, 350. 16. Hitt, Ireland, and Hoskisson, 2009, p. 60. 17. Ibid., p. 61. 18. C. Miller, “Linking Mission and Money: An Introduction to Nonprofit Capitalization.” Retrieved from www.nonprofitfinancefund.org/docs/Linking MissionWebVersion.pdf. 19. Hitt, Ireland, and Hoskisson, 2009, p. 78.

Chapter = c01

Date: Dec 13, 2010

272

20. 21. 22. 23. 24. 25.

26.

27. 28. 29. 30. 31. 32. 33. 34.

35. 36. 37. 38. 39. 40.

41. 42. 43. 44. 45.

Time: 12:12 pm

Notes

Ibid., p. 81. Ibid., pp. 82–83 Miller, 2001, p. 3. Ibid., p. 5. This discussion of diversification is informed by the work of Hitt, Ireland, and Hoskisson, 2009. M. A. Taylor, J. G. Dees, and J. Emerson, “The Question of Scale: Finding an Appropriate Strategy for Building on Your Success.” In J. G. Dees, J. Emerson, and P. Economy, eds., Strategic Tools for Social Entrepreneurs: Enhancing the Performance of Your Enterprising Nonprofit (New York: John Wiley & Sons, 2002), 236. For example, Leslie Crutchfield and Heather McLeod Grant’s Forces for Good: The Six Practices of High-Impact Nonprofits, 1st ed. (San Francisco: Jossey-Bass, 2008), p. 27. Searched for exemplary agencies without regard to budget, but ended up finding 12 agencies with average revenues of $161.5 million (median $41.5 million) and purposely excluded agencies with “only local impact.” M. E. Porter, “What Is Strategy?” Harvard Business Review 74(6) (1996): 76–77. Miller, 2001, p. 6. McKinsey & Company, Effective Capacity Building in Nonprofit Organizations (Reston, VA: Venture Philanthropy Partners, 2001). “Capital Structure.” Retrieved June 13, 2010, from www.investopedia.com/terms/c/ capitalstructure.asp. C. Miller, “Hidden in Plain Sight: Understanding Nonprofit Capital Structure,” Nonprofit Quarterly, 2003: 1. “Glossary.” Retrieved March 15, 2010, from www.charitynavigator.org/index.cfm?bay= glossary.list#W. A. Blackwood and T. Pollak, Washington-Area Nonprofit Operating Reserves, no. 20 (Washington, DC: Center on Nonprofits and Philanthropy, 2009), 2. T. A. McLaughlin, Streetsmart Financial Basics for Nonprofit Managers, 3rd ed. (Hoboken, NJ: John Wiley & Sons, 2009); T. McLaughlin, “Financial Management.” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 251–271. Porter, 1996, p. 62. D. Renz and R. Herman, “More Theses on Nonprofit Organizational Effectiveness,” ARNOVA News 33 (2004): 10. N. Kleiman and N. Rosenbaum, The Limits of Social Enterprise: A Field Study & Case Analysis (New York: Seedco, 2007), 4. Powering Social Change: Lessons on Community Wealth Generation for Nonprofit Sustainability (Washington, DC: Community Wealth Ventures, 2003). W. Foster and J. Bradach, “Should Nonprofits Seek Profits?” Harvard Business Review 83(2) (2005): 96. C. Massarsky and S. L. Beinhacker, Enterprising Nonprofits: Revenue Generation in the Nonprofit Sector (New Haven, CT: The Goldman Sachs Foundation Partnership on Nonprofit Venture, Yale School of Management, 2002). Ibid., p. 10. Ibid., p. 10. Foster and Bradach, 2005, “Social Enterprise: Hype or Reality?” Retrieved from www. se-alliance.org/about hype.cfm. J. Trexler, “Social Enterprise and the Recency Illusion.” Retrieved from http:// uncivilsociety.org/2007/12/social-enterprise-and-the-rece.html. C. Miller, “Truth or Consequences: The Implications of Financial Decisions,” Nonprofit Quarterly 15(2) (2008): 12.

Chapter = c01

Date: Dec 13, 2010

Notes

Time: 12:12 pm

273

46. W. Bielefeld, “What Affects Nonprofit Survival?” Nonprofit Management and Leadership 5(1) (1994): 19. 47. Foster and Bradach, 2005. 48. L. M. Salamon, S. L. Geller, and K. L. Mengel, Nonprofits, Innovation, and Performance Measurement: Separating Fact from Fiction (Baltimore: Johns Hopkins University Center for Civil Society Studies, 2010), 5–6.

Appendix C 1. P. Brinckerhoff, Social Entrepreneurship: The Art of Mission-Based Venture Development (New York: John Wiley & Sons, 2000), 66. 2. B. Ross and C. Segal, The Influential Fundraiser: Using the Psychology of Persuasion to Achieve Outstanding Results, 1st ed. (San Francisco: Jossey-Bass, 2009), 57–58. 3. K. Majeska, “Understanding and Attracting Your ‘Customers.’ ” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 213. 4. Ibid., p. 214. 5. Brinckerhoff, 2000, p. 74. 6. C. Lovelock, “Targeting the Market and Developing a Marketing Plan.” In S. M. Oster, C. W. Massarsky, and S. L. Beinhacker, eds., Generating and Sustaining Nonprofit Earned Income: A Guide to Successful Enterprise Strategies (San Francisco: Jossey-Bass, 2004), 46. 7. T. McLaughlin, “Financial Management.” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 252–253. 8. Brinckerhoff, 2000, p. 67; italics removed. 9. J. Kelly, C. Cook, and D. Spitzer, Unlocking Shareholder Value: The Keys to Success (Amstelveen, Netherlands: KPMG, 1999), 2. 10. W. G. Bowen, Inside the Boardroom: Governance by Directors and Trustees (New York: John Wiley & Sons, 1994). 11. D. La Piana, “Success Rates of Nonprofit Mergers,” personal communication, October 31, 2006. 12. G. J. MacDonald, “Nonprofit Organizations Seek Strength in Mergers,” Christian Science Monitor, 2006. 13. J. Masaoka, “Merger: What Does a Typical Process Look Like?” CompassPoint Board Cafe, June 2004. 14. T. Wallack, “Mergers that Make Sense,” San Francisco Chronicle, March 31, 2004: C1. 15. D. La Piana and M. Hayes, Play to Win: The Nonprofit Guide to Competitive Strategy, 1st ed. (San Francisco: Jossey-Bass, 2005), 28. 16. Brinckerhoff, 2000, p. 183. 17. Ibid., p. 176. 18. P. Caesar and T. Baker, “Fundamentals of Implementation.” In S. M. Oster, C. W. Massarsky, and S. L. Beinhacker, eds., Generating and Sustaining Nonprofit Earned Income: A Guide to Successful Enterprise Strategies (San Francisco: Jossey-Bass, 2004), 221. 19. S. Anthony, “How to Kill Innovation: Keep Asking Questions.” Retrieved March 1, 2010, from www.bloomberg.com/apps/harvardbusiness?sid=Hdce46ee0bd8fdb46e5b60dd41 038aacf. 20. BrainyQuote, from www.brainyquote.com, 2001–2010. 21. Caesar and Baker, 2004, p. 207. 22. Ibid., pp. 210–221; emphasis removed.

Chapter = c01

Date: Dec 13, 2010

274

Time: 12:12 pm

Notes

23. R. M. Kanter, “Innovation: The Classic Traps,” Harvard Business Review 84(11) (2006): 75–78. 24. Nonprofit Governance Index 2007, 2007. 25. M. E. Porter, “What Is Strategy?” Harvard Business Review 74(6) (1996): 61–78. 26. Quoted in J. Pfeffer and R. I. Sutton, Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management (Boston: Harvard Business School Press, 2006), 157. 27. L. Bossidy, R. Charan, and C. Burck, Execution: The Discipline of Getting Things Done, 1st ed. (New York: Crown Business, 2002), 15. 28. C. Massarsky and S. L. Beinhacker, Enterprising Nonprofits: Revenue Generation in the Nonprofit Sector (New Haven, CT: The Goldman Sachs Foundation Partnership on Nonprofit Venture, Yale School of Management, 2002), 11. 29. A. Bhide, “How Entrepreneurs Craft Strategies that Work,” Harvard Business Review 72(2) (1994): 152. 30. J. Rooney, “Planning for the Social Enterprise.” In J. G. Dees, P. Economy, and J. Emerson, eds., Enterprising Nonprofits: A Toolkit for Social Entrepreneurs (New York: John Wiley & Sons, 2001), 274. 31. A. Solas and A. M. Blumenthal, “Pitching Your Venture.” In S. M. Oster, C. W. Massarsky, and S. L. Beinhacker, eds., Generating and Sustaining Nonprofit Earned Income: A Guide to Successful Enterprise Strategies (San Francisco: Jossey-Bass, 2004), 131. 32. W. A. Sahlman, “How to Write a Great Business Plan,” Harvard Business Review 75(4) (1997): 98. 33. Brinckerhoff, 2000, pp. 74–75; italics removed. 34. “Small Business Planner: Write a Business Plan.” Retrieved June 28, 2010, from www.sba .gov/smallbusinessplanner/plan/writeabusinessplan/SERV WRRITINGBUSPLAN.html. 35. Sahlman, 1997, p. 98. 36. P. M. Senge, The Dance of Change: The Challenges of Sustaining Momentum in Learning Organizations, 1st ed. (New York: Currency/Doubleday, 1999), 6. 37. J. Kotter, “Leading Change: Why Transformation Efforts Fail,” Harvard Business Review 73(2): 59. 38. B. M. Bass and R. M. Stogdill, Bass & Stogdill’s Handbook of Leadership: Theory, Research, and Managerial Applications, 3rd ed. (New York: Free Press, 1990), 289; G. Yukl, Leadership in Organizations, 5th ed. (Upper Saddle River, NJ: Prentice Hall, 2002), 274. 39. D. Miller and P. H. Friesen, “Momentum and Revolution in Organizational Adaptation,” Academy of Management Journal 23(4) (1980): 591. 40. J. O’Toole, Leading Change: Overcoming the Ideology of Comfort and the Tyranny of Custom, 1st ed. (San Francisco: Jossey-Bass, 1995), 253. 41. C. M. Christensen and M. Overdorf, “Meeting the Challenge of Disruptive Change,” Harvard Business Review 78(2) (2000): 68. 42. Pfeffer and Sutton, 2006, p. 167. 43. Ibid., p. 178. 44. Ibid., p. 179. 45. Ibid., p. 185. 46. Porter, 1996, p. 70. 47. D. Packard, D. Kirby, and K. R. Lewis, The HP Way: How Bill Hewlett and I Built Our Company, 1st ed. (New York: HarperBusiness, 1995), 142.

Chapter = BABOUT

Date: Dec 7, 2010

Time: 2:33 pm

About the Author

All you need to be assured of success in this life is ignorance and confidence. —Mark Twain

M

ark Light has more than 20 years of frontline leadership experience. Known for his contagious enthusiasm and high energy, he is president and founder of First Light® Group LLC with a mission of Putting Your Future Within Reach® with Results Now® services that make you the star. As a practioner, Mark’s past experience includes 15 seasons as president of the Victoria Theatre Association, where he led its turnaround into a top-30 performing arts center with audiences up fivefold to 900,000, annual income up 24-fold to $21.3 million, and the opening of three new venues including the $130 million Schuster Center. He was a decade-long Tony Awards® voter and won the first Outstanding Achievement in Presenter Management Award from the League of American Theatres and Producers, whose members vote on the Tonys. As an author, John Wiley & Sons published his first book, The Strategic Board, and BoardSource published his Executive Committee. His writing has appeared in Board Member magazine, the Nonprofit Management and Leadership Journal, and The Nonprofit Quarterly, which is home to Mark’s Dr. Conflict advice column. As an educator, Mark currently teaches at the Mandel Center for Nonprofit Organizations at Case Western Reserve University, where he received the 2010 Mandel Center Teaching Award. He holds a BFA from Drake University, an MBA from UCLA, and a PhD from Antioch University.

275

Chapter = BABOUT

Date: Dec 7, 2010

Time: 2:33 pm

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

Index

Accountability, 25, 31, 124, 181–194 agendas, 183–187 annual, 183–186 board meeting, 186–187 assessments, 187–194 board, 187 board member, 190–191 executive director, 191–194 Affinity grouping, 208. See also BAM process Alliance for Nonprofit Management, ix, 6, 9–10 survey on capacity building, 14 Alliances, 230–231 Allison, Michael, 16, 21, 98 Alston, Farnum, 21 Anderson, Philip, 175 Andringa, Robert, 150, 152 Ansoff Matrix, 108 The Ask (Fredricks), 143 Avolio, Bruce, 43 Awamleh, Raed, 84 Badaracco, Joe, 40 Baker, Thomas, 214, 233 Balance sheet, 229–230 BAM process (brainstorming, affinity grouping, and multivoting), 44, 50, 99–101, 104, 105–106, 207–209 affinity grouping, 208

multivoting, 208–209 use in making vision statement, 99–101, 104, 105–106 ideas from, 106 Barry, Bryan, 16, 21 Bart, Christopher, 48 Bass & Stogdill’s Handbook of Leadership, 84 Beinhocker, Eric, 21 Benchmarking, 94–95 Best practices, investigating, 94–95 Better Business Bureau’s (BBB) Wise Giving Alliance Standards for Charity Accountability, 179–180 Bhide, Amar, 89, 94, 104, 235 Big Brothers–Big Sisters lines of business, 71 mission, 53, 58 organizational chart, 124–126 executive director summary overview, 197–198 Bigelow, Barbara, 20 Blackmon, Myra, 200–201 Blink: The Power of Thinking without Thinking (Gladwell), 110 Blumenthal, Barbara, 7 Board meeting advance information template, 239–246 277

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

278

Boards of directors. See also Governance; Smart board committees, 160–166 executive, 164–166 finance, 166 governance, 166 duties, 158–172 board, 159 board member, 168–169 executive director, 169–172 guidelines, 172–180 board, 172–173 board member, 173–175 executive director, 176–180 involvement in master plan, 34–35 member term limits, 143–144 officers, 167–168 performance questionnaire, 154–157 rankings, 156 results, 154–156 key complaints about, 139 BoardSource survey on fund raising, 143 Bogues, Muggsy, 60–61, 89 Borden, Neil, 211 Bossidy, Larry, 21, 120, 121, 234 Bowen, William, x–xi, 22, 30, 73, 76, 138, 139 Boyd, Brian, 19–20 “Bozo-proofing,” 32 Bradach, Jeffrey, 226 Brainstorming, affinity grouping, and multivoting. See BAM process Brainstorming, five official steps to, 207 Brewster, Richard, 107 Brinckerhoff, Peter, 91, 95, 96–97, 117, 216, 227, 228, 230, 231, 235 business plan contents, 235

Index

questions for promoting strategy, 228 questions regarding pro-forma financials, 230 Social Entrepreneurship Readiness Checklist, 96 three-question approach to strategy, 227 views on mission, 91 views on risk orientation, 95 views on tax issues, 231 Brinkerhoff, Derick, 7 Bronson, Po, 87 Brown, Michael, 41 Bryson, John, 16, 21, 88, 99, 101, 126 approach to vision statement, 88–89, 99, 101 strategy-development process questions, 126 Buckingham, Marcus, 94 Budget, 133–136 balance sheets, 135–136 formats, 134–135 abbreviated 990-based, 135 better, 134 common, 134 Built to Last (Collins & Porras), 43, 172 Burns, James McGregor, 13 Business plan, 233–236 factors in, 235 failure, 233–235 Small Business Administration’s template for, 235–236 Business Plan Pro (business planning software), 236 Caesar, Patricia, 214, 233 Cameron, Kim, 4, 6–7, 8 Capacity, definition of, 9 Capacity Assessment Grid (Venture Philanthropy Partners), 222

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

279

Index

Capacity building, 8–12 Capital structure, 223 Carver, John, x, xi, 30, 57, 138, 160, 162, 176, 204 Carver, Miriam, x, xi, 30, 57 Cash-flow projection, 229–230 Chait, Richard, 137–138, 139, 204 Chang, Cyril, 97 “Change or die” questions, 237 Charan, Ram, 21, 120, 121, 234 Charity Navigator, 223 Christensen, Clayton, 237 Ciulla, Joanne, 39 Cohen, Rick, 7–8 Collins, Jim, 6, 17, 20, 43, 48, 61, 73–74, 87, 101, 169, 172, 183 defining values, 43 views on accountability, 183 views on board members, 169 views on measuring performance, 73–74 views on values, 172 views on vision statements, 87, 101 views on visionary companies, 17, 20 Committees, 160–166 executive, 164–166 duties, 166 primary dangers of, 164 Community Wealth Ventures survey, 65, 225–226 Competitive advantage, 112 Conger, Jay, 87 Core Competencies Matrix, 220 Core competencies, testing, 219 Covey, Stephen, 26, 32, 194 Crittenden, William, 20 Crosby, Philip, xi Culture, organizational, 41

Customers, listening to, 92–94 Cutcher-Gershenfeld, Susan, 7 David, Fred, 53 Dawkins, Richard, 39 Dayton, Kenneth, 140, 171, 205 Dayton Opera, 19 Decision-making approaches, 114–116 Dees, Gregory, 106–107 Delegation, 12, 31, 149–180 duties, 158–172 board, 159 board member, 168–169 executive director, 169–172 guidelines, 172–180 board, 172–173 board member, 173–175 executive director, 176–180 levers, 150–158 improving governance, 153–158 puzzles, 150–153 Deming, W. Edwards, 23, 206 Management Method, 23 Distribution channel, 213 Diversification, 221 Double Bottom Line Matrix, 113 Drath, Wilfred, 111 Drucker, Peter, 3, 4, 29, 33, 47, 50, 60, 74, 91, 92, 99, 139, 212 defining high performance, 3 five-question protocol for evaluating effectiveness, 50, 91 views on customers, 92, 212 views on measuring performance, 74 views on mission, 47, 60 views on nonprofit organizations, 4 views on vision statement, 99

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

280

DUMB approach, in making goals, 129 Duties, 158–172 board, 159 board member, 168–169 executive director, 169–172 Dysfunctional organization, 10 symptoms of (Wagner & Hager), 96 Earned Income Matrix, 108 Earned income strategies, 226 Effectiveness, gauging, 3–4 Efficiency, 3 Engstrom, Ted, 150, 152 Escalation of commitment, 112 Ethical climate, promoting, 42 Ethics. See Values Ethics, the Heart of Leadership (Ciulla), 39 Executive committee, 164–166 duties, 166 primary dangers of, 164 Executive director adding value, 199–206 actions taken in board-centered leadership, 204 assessments, 191–194 accountability, 192 climate, 192 governance, 193 leadership, 194 openness, 193 socializing, 194 duties, 169–172 guidelines, 176–180 Expectancy theory, 77 External Analysis Matrix, 218 Final Answers analyses, 116–117, 227–238 final decision, 232–238 business plan, 235–236

Index

contingencies, 232–235 final answer, 236–238 management, 231–232 marketing, 228–229 money, 229–232 strategy, 227 Finance committee, 166 Financial vulnerability, operational criteria of, 97 Finkelstein, Sydney, 175 Finney, Chris, 60 First Cut analyses, 116–117, 211–226 ability to execute strategy, 217–225 capacity, 219–223 comparisons, 223–225 context, 217–218 market, 213–217 probabilities, 216–217 value proposition, 215–216 match, 225–226 strategies, 211–213 people, 211–213 place, 213 price, 214–215 product, 213 Focus groups, 228 “For-profitizing,” 4 Forbes, Daniel, 4–5 Foster, William, 226 Four pillars of high performance, 11–12, 29–35 governance, 12, 30–31 accountability, 12, 31 delegation, 12, 31 operations, 11 purpose, 11 strategy, 11 Fredricks, Laura, 143 Freeman, Edward, 41 Function map. See Organizational chart

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

281

Index

Fund raising, BoardSource survey on, 143 Funding, obstacles related to, 112 Galanter, Eugene, 13 Gardner, Howard, 23 Gardner, William, 84 Geller, Stephanie, 94 General Electric, approach to vision making, 87 George, Bill, 40 Gilmartin, Raymond, 85 Gladwell, Malcolm, 110 Glomb, Michael, 138 Goals, operating plan, 5, 123–132 attainment, 5 at the board level, 130 improvement-oriented, template for action steps related to, 130–131 organizational chart, 124–126 Big Brothers–Big Sisters, 125 child services agency, 125 properly formatted, 130 strategy-development process, 126–132 generating ideas, 126–129 making goals, 129–132 Goldmark, Peter, 74 Good to Great (Collins), 169 Goodstein, Leonard, 21, 120 Governance, 12, 30–31, 137–206. See also Boards of directors; Smart board accountability, 25, 31, 124, 181–194 agendas, 183–187 assessments, 187–194 delegation, 12, 31, 149–180 duties, 158–172 guidelines, 172–180 levers, 150–158

as pillar of high performance, 12, 30–31 accountability, 12, 31 delegation, 12, 31 problem-fixing approach to, 145–146 seven realities of, 141–147 composition, 142 continuity, 143 executive director inexperience, 144 fund ability, 143 imperfect knowledge, 141 scarcity of time, 141 size, 141–142 smart board, 195–206 adding value, 199–206 essential questions, focusing on, 205–206 preparing for meetings, 196–199 Governance committee, 166 Governance Index, 138, 151–152, 234 Governing Boards (Houle), 150 Grantmakers for Effective Organizations, 10 Gregorian, Vartan, 3, 5 Gross, Terry, 39 Grossman, Allen, 10 Grove, Andy, 234 Growth-Share Matrix, 113 Gruber, Robert, 113 Guidelines, 172–180 board, 172–173 board member, 173–175 executive director, 176–180 Guskin, Alan, 86 Hackman, Richard, 167 Hager, Mark, 96 Hamel, Gary, 88 Harrington, Robert, 231

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

282

Hayes, Michaela, 54, 64 Heifetz, Ronald, 85 Heimovics, Dick, 171, 203–204 Hellriegel, Don, 129 Helm, Scott, 108–109 Herman, Robert, 4, 5, 6, 9, 10, 20, 76, 171, 203–204, 225 defining high performance, 5 views on assessing organizational effectiveness, 5, 6, 76, 225 Herzlinger, Regina, 74 High performance, 3–12 capacity building, 8–12 defining, 3–8 four pillars of, 11–12, 29–35 governance, 12, 30–31 operations, 11 purpose, 11 strategy, 11 multiple constituencies approach to, 5–8 operationalizing, 5–6 Hitt, Michael, 217–218, 219 Holland, Thomas, 137–138, 139, 200–201, 205 Hopkins, Karen, 15 Hoskisson, Robert, 217–218, 219 Houle, Cyril, 150 Hyde, Cheryl, 15 Independent Sector, 14 Innovation, study on (Salamon, Geller, & Mengel), 94–95 Internal analysis, 219–220 Ireland, Duane, 217–218, 219 Iron triangle, 220–223 capacity assessment, 222 capital structure, 223 mission and programs, 220–222 IRS Form 990, use in success measures, 79–80 Israeli Defense Forces study, 85

Index

Jackson, Peggy, 195 Jerry Maguire, 23, 37–38, 49, 83, 103, 119–120, 149 Jones, Thomas, 40 Kahneman, Daniel, 95 Kanter, Rosabeth Moss, 7, 74, 233 classic traps for innovation failure, 233–234 Kaplan, David, 73 Kaplan, Robert, 15, 73 Kaplan, Sarah, 21 Katzenbach, Jon, 142, 167, 169 Kay, John, 18 Kaye, Jude, 16, 21, 98 Kearns, Kevin, 9 Kibbe, Barbara, 9, 10 Kim, W. Chan, 95 Knight, Charlie, 87 Korngold, Alice, 202–203 Kotter, John, 84, 111, 237 Kouzes, James, 43 Kramer, Mark, 74 La Piana, David, 54, 55, 64, 212, 231 LaFasto, Frank, 47, 146, 153–154, 157, 168–169, 174 views on board of directors as team, 146, 153–154, 157, 168–169, 174 Lampkin, Linda, 231 Larson, Carl, 47, 146, 153–154, 157, 168–169, 174 views on board of directors as team, 146, 153–154, 157, 168–169, 174 Leading by example, 43 Lee, Jamie, 10 Leifer, Jacqueline Covey, 138 Leonard, Dorothy, 110–111 Lester, David, 13

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

Index

Letts, Christine, 10 Light, Paul, 10, 26, 47, 153 Lines of business, 67–72 front lines, 68–69 United Way example, 68–69 making, 71–72 Big Brothers–Big Sisters chapter, 71 fair housing agency, 72 Multiple Sclerosis chapter, 71 means and ends, 70–71 Girl Scout cookie sales example, 70 Livingston, J. Sterling, 129 Lovallo, Dan, 95 Lovelock, Christopher, 228–229 Luthans, Fred, 43 LYBATD syndrome, 195 Mackay, Harvey, 49 MacMillan Product Matrix, 114 Majeska, Kristin, 93, 211 Managing Business Ethics (Trevi˜no & Nelson), 39 Marciniak, Michelle, 49 Market awareness, 212 Marketing strategies, 228–229 Masaoka, Jan, 231 Master plan, x, 29–35 illustrated, 31 Mathiasen, Karl, 158 Mauborgne, Renée, 95 McCarthy, Jerome, 211 McFarlan, Warren, 164 McLaughlin, Thomas, 89, 223 Meléndez, Sara, 8 Mengel, Kasey, 94 Merrill, Rebecca, 194 Merrill, Roger, 194 Middleton, Melissa, 141 Miller, Clara, 79, 219, 220, 223 Miller, George, 13

283

Mintzberg, Henry, x, 15, 18, 20, 21, 27, 29, 33, 64, 84, 88, 100, 112 recommendations on planning, 18, 20, 21, 27, 100 views on leadership, 112 views on managerial work, 15 views on strategies, 29, 33, 64, 84 views on vision, 84 views on SWOT analyses, 88 Mission, organizational, 47–61 advantage, 53–57 Big Brothers–Big Sisters chapter, 53 Girl Scout council, 53 benefits of, 48 competitive advantage, 60–61 customers, 49–51 difference, 51–53 Big Brothers–Big Sisters chapter, 53 chamber of commerce, 52–53 Multiple Sclerosis Society chapter, 52 Save the Children, 53 summary, 57–60 Big Brothers–Big Sisters chapter, 58 Multiple Sclerosis Society chapter, 59 Outward Bound, 59 Share Our Strength, 59 United Way, 59 Victoria Theatre Association, 59 Mission creep, 68 Mission statement, 51–53 Mohr, Mary, 113 Multiple constituencies, 5–8 Multivoting, 208–209. See also BAM process Mumford, Michael, 84

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

284

Nadler, David, 127 Nanus, Burt, 84, 115–116 National Business Ethics Survey (2007), 40, 41 National Federation of Independent Business study (1990), 17 NBES. See National Business Ethics Survey Nelson, Katherine, 39 Newman, William, 127 Nolan, Timothy, 21, 120 Nonprofit employees, 1–2 Nonprofit Policy Sampler (Lawrence, Flynn, & Fletcher), 167 Norton, David, 15 Nutt, Paul, 109 Obstacles, seeking out goals in, 128–129 United Way, 128 Officers, 167–168 Ohio Association of Nonprofit Organizations (OANO) Standards of Excellence, 179 Omidyar, Pierre M., 4 Operating plan, 120, 121. See also Goals, operating plan Operations, 11, 119–136 budget, 133–136 balance sheets, 135–136 formats, 134–135 goals, operating plan, 5, 123–132 attainment, 5 at the board level, 130 improvement-oriented, template for action steps related to, 130–131 organizational chart, 124–126 properly formatted, 130 strategy-development process, 126–132 as pillar of high performance, 11

Index

Organizational capacity, 219–223 internal analysis, 219–220 iron triangle, 220–223 capacity assessment, 222 capital structure, 223 mission and programs, 220–222 Organizational chart, 124–126 Oster, Sharon, 94, 218 nonprofit approach, six forces of, 218 O’Toole, James, 237 Overdorf, Michael, 237 Packard, David, 238 Panera Bread, 215 Parade 2008 annual report, 2 Pareto, Vilfredo, 34 Pareto Principle (80/20 rule), 34 Pascal’s Gambit, 27 Pathways to Nonprofit Excellence study, 10 Payoff Matrix, 115 PEST approach, 218 Peters, Tom, 33, 94, 108 Pfeffer, Jeffrey, 237 Pfeiffer, William, 21, 120 Phills, James, 48, 49 Pierce, John II, 53 Pink, Daniel, 38, 57 Planning rules, 13–27 benefits and uses of, 22 bottom lines, 25–27 as communications tool, 23–25 proactive approach to, 19–23 reactive approach to, 14–19 Policy Governance® model, 30 Porras, Jerry, 6, 17, 20, 43, 48, 61, 87, 101, 172 defining values, 43 views on values, 172

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

285

Index

views on vision statements, 87, 101 views on visionary companies, 17, 20 Porter, Michael, 6, 27, 63, 65, 67, 73, 74, 77, 82, 99, 113, 218, 221–222, 223, 238 defining operational effectiveness, 223 five forces model, 218 views on building competitive strategy, 65, 67 views on scaling up, 221–222 views on strategy, 113 Portfolio Analysis Matrix. See Double Bottom Line Matrix Posner, Barry, 43 Prahalad, C. K., 88 Pribram, Karl, 13 Proactivity, 32 Profit-and-loss statement, 229–230 Program support, 24 Purpose, 11, 37–61, 90–91 mission, organizational, 47–61 advantage, 53–57 benefits of, 48 competitive advantage, 60–61 customers, 49–51 difference, 51–53 summary, 57–60 as pillar of high performance, 11 reaffirming, 90–91 values, organizational, 39–46 authenticity, 42–46 five “buckets” of, 46 opposing unethical practices, 42 promoting an ethical climate, 42 statement of, 46 value-centered leadership, 40–42

Quinn, James Brian, 175 Rangan, Kasturi, 48 Rash, Dillman, 133 Rath, Tom, 89 Renz, David, 4, 5, 6, 9, 10, 20, 76, 225 defining high performance, 5 views on assessing organizational effectiveness, 5, 6, 76, 225 Results Now, ix–xi, 22, 23, 29–35, 50, 87, 98, 120, 176, 183–184 and accountability, 183 master plan, 29–35, 176, 184, 197 model, 10 operating plan, 120, 121 vision statement, 87, 98 Reverse Matrix, 115 Risks, understanding, 95–98 Rockefeller, Sharon Percy, 75, 158, 168 Rooney, Jeanne, 235 Ross, Bernard, 227 Rowe, Glenn, 86 Rumsfeld, Donald, 233 Ryan, William, 10, 204 Sahlman, William, 235, 236 Salamon, Lester, 94 Scaling up, 221–222 Schein, Edgar, 41 Schlesinger, Leonard, 111 Schumpeter, Joseph, 106 Schuster Center for the Performing Arts (Dayton, OH), 181–182 Segal, Claire, 227 The Selfish Gene (Dawkins), 39 Senge, Peter, 237 The Seven Habits of Highly Effective People (Covey), 32 Shriner, Robert, 4 Siciliano, Julie, 20 Simon, Herbert, 110, 111, 114–115

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

286

Simplified Strategic Planning: A No-Nonsense Guide for Busy People Who Want Results Fast (Bradford, Duncan, & Tarcy), 16 Slocum, John, 129 Smart board, 195–206. See also Boards of directors; Governance adding value, 199–206 boards, 200–201 board members, 201–203 executive director, 203–205 essential questions, focusing on, 205–206 preparing for meetings, 196–199 SMART method, in making goals, 129 Smith, Douglas, 142, 167, 169 Smith, Frederick, 85 Social constructivism, 7. See also Multiple constituencies Social Entrepreneurship Readiness Checklist (Brinckerhoff), 96 Sponsorship support, 24–25 Staffing, 16 “Standing ovation experiences,” 55–56 Stanford Social Innovation Review, 7 Starfish rule, 114 Statement of Activities, 229–230 Statement of Financial Position, 229–230 Stone, Melissa, 7, 20 Strange, Jill, 84 Strategic planning, 14. See also Planning rules chronology of, 63–65 Strategies, ranking, 115–116 Strategy, 11, 63–117 lines of business, 67–72 front lines, 68–69

Index

making, 71–72 means and ends, 70–71 as pillar of high performance, 11 success measures, 73–82, 126–127, 223, 224 adding capital structure to, 223 comprehensive, 224 making, 78 measuring the unmeasurable, 73–74 reasons for measuring, 74–78 vision statement, 83–101 making, 87–101 vision types, 83–87 vision strategies, 103–117 generating ideas, 104–109 making, 109–116 Straus, Susaan, 110–111 Success measures, 73–82, 126–127, 223, 224 adding capital structure to, 223 comprehensive, 224 making, 78 arts agency fundraising line of business, 82 economic development agency, 81 lines of business, 81–82 mission, 78–80 performing arts agency, 79 regional theatre, 81 measuring the unmeasurable, 73–74 reasons for measuring, 74–78 Girl Scout Council, 76 performing arts agency, 77 Summers, David, 74 Sunk cost fallacy, 112 Survey research, 228 Sustaining Innovation (Light), 26 Sutton, Robert, 237 SWOT analysis, 88–89

Chapter =

Date: Dec 13, 2010

Time: 11:52 am

Index

Target market, 212 Taylor, Barbara, 137–138, 139, 204 Teams, malfunctioning, 47 Term limits, board member, 143–144 Test marketing, 228 Tierney, Thomas, 144 Treviño, Linda, 39, 41 Trussel, John, 97 study of charitable organizations, 97–98 Tsui, Anne, 7 Tuckman, Howard, 97 Tulenko, Paul, 88 Tushman, Michael, 127 Unethical practices, opposing, 42 United Way lines of business example, 68–69 mission summary example, 59 obstacles, seeking out goals in, 128–129 “United We Stand: How to Make Your Board Work Like a Championship Team,” 145–146 Valery, Paul, 85 Value proposition, 215–216 Values, organizational, 39–46 authenticity, 42–46 five “buckets” of, 46 opposing unethical practices, 42 promoting an ethical climate, 42 statement of, 46 value-centered leadership, 40–42 Victoria Theatre Association, 18–19, 25–26, 59, 91, 93, 198–199 abbreviated executive summary of, 198–199 Vision statement, 83–101 making, 87–101

287

checklist of questions, 101 fair housing agency statement, 100 understanding the business and its strategy, 90 vision types, 83–87 Vision strategies, 103–117 generating ideas, 104–109 BAM process, 105–106 questions for, 106–109 vision statement, 105 making, 109–116 directive and participative, 111–112 decision-making approaches, 114–116 intuitive and analytic, 109–111 investigating strategies, 116–117 start, stop, and continue, 112–114 Visioning exercise (Allison & Kaye), 98–99 von Moltke, Helmuth, 33, 232–233 Wagner, Lilya, 96 Walvius, Susan, 49 Waterman, Robert, 33, 94, 108 Weighted Decision Matrix, 116 Why Firms Succeed, 18 Wiley, Alexander, 43 The Wisdom of Teams (Katzenbach & Smith), 167 Working capital ratio, 223 Worth, Michael, 120 YMCA, study of strategic planning in, 20 Yukl, Gary, 42, 83, 86, 111 modification of Vroom and Yetton’s model, 111