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Preface 5

Author Biography 8

Acknowledgements 9

Part I: Setting the Frame 10

Chapter 1 The Four Pillars of High-performance 11

Defining High Performance 11

The Third Envelope 16

Chapter 2 Planning Rules 21

Just Say No 22

Just Say Yes 27

Show Me the Money 30

Bottom Lines 33

Chapter 3 All Together 36

Master Plan 37

Be Quick 38

Part II: Purpose 43

Chapter 4 Values 45

Getting Real 46

Talk that Walks 48

Chapter 5 Mission 54

Who are our customers? 56

What difference do we make? 58

How are we better than our rivals? 60

The Sweet Spot 65

Hoop Dreams 69

Part III: Strategic Plan 71

Chapter 6 Lines of Business 74

What Are We Doing Now 74

Means and Ends 76

Making Lines of Business 77

Chapter 7 Success Measures 80

Measuring Unmeasurable 80

Why Measure 81

Making Success Measures 84

Mission Success Measures 85

Lines of Business Success Measures 87

Chapter 8 Vision Statement 90

Vision Types 90

Making Statements 93

Ready Your Mind 96

Reaffirm Your Purpose 97

Listen to your Customers 98

Know the Best of Best in Your Field 100

Understand Your Risks 102

Make Your Statement 104

Chapter 9 Vision Strategies 109

Making Strategies 109

Generate Your Ideas 110

Vision Statement 110

BAM 111

Good Questions 112

Make Your Strategies 115

Intuitive and Analytic 115

Directive and Participative 116

Start, Stop, and Continue 117

Fast and Slow 120

What Next 121

Part IV: Operating Plan: 123

Chapter 10 Goals 126

Department Map 127

Making Goals 128

Generate Your Ideas 129

Make Your Goals 131

Chapter 11 Budget 135

Part V: Governance Plan 139

Seven Realities 142

Chapter 12 Delegation 149

Low Hanging Fruit 150

Puzzles 150

Levers 153

Duties 158

Board Duties 159

Board 159

Committees 161

Officers 167

Board Member Duties 169

Executive Director Duties 171

Guidelines 173

Board Guidelines 173

Board Member Guidelines 174

Executive Director Guidelines 176

Chapter 13 Accountability 183

Agendas 185

Annual Agenda 185

Board Meeting Agenda 189

Assessments 190

Board 190

Board Member 193

Executive Director 196

Chapter 14 Smart Board 199

Help Me Help You 200

Adding Value 203

Boards 204

Board Members 205

Executive Director 207

Appendixes 210

Appendix A—BAM 210

Appendix B — First Cut 212

Strategies 213

People 213

Product 214

Place 215

Price 215

Market 217

Probabilities 217

Proposition 218

Muscle 219

Context 219

Capacity 220

Internal Analysis 220

The Iron Triangle 222

Comparisons 226

Match 227

Appendix C: Final Answer 228

Strategy 228

Marketing 229

Money 230

Management 232

Final Answer 234

Contingencies 234

Business Plan 236

Final Answer 238

Appendix D: Board Meeting Advance Information Template 240

Preface

The main thing is to make sure that the main thing is still the main thing.

- James Barksdale

Results Now® is the quick and practical process for strategic, operating, and governance planning. 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.”[i]

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 fact-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 revenues 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:

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 only on strategic planning; operations and governance are ignored, but Results Now is different. It puts strategic, operating, and governance planning under one in one package 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.”[ii] Thus, the trick is to find a process that offers enough structure to be purposeful, but not so much that the organization loses its adaptability. Results Now strikes that balance.

Results Now can deliver many benefits including fostering a welcome climate for give-and-take strategic thinking instead of the usual show-and-tell monotony of rubber-stamping. Results Now can build capacity, clarify the organization’s story for the community, and keep people on point about what’s important. It can build team cohesion, orienting newer leadership members and recharging seasoned ones. Making Results Now worth its weight in gold is the evidence that funders reward those who plan.[iii]

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.”[iv] 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 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 part of an overall approach to Board Meeting Advance Information that puts everything in one document including agenda, minutes, and self-assessments for the board, board members, and executive. 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.”[v]

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.”[vi] 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 be in place and that it be monitored carefully.”[vii] 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 in five parts. The first section – Setting the Frame - makes the case for and introduces Results Now. The following four sections present the elements of the Results Now Master Plan: Purpose, Strategic Plan, Operating Plan, and Governance Plan.

The renowned quality expert Philip Crosby once said, “Good things only happen when planned; bad things happen own.”[viii] It is my hope that good things happen for you and your organization as a consequence of Results Now.

Author Biography

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

- Mark Twain

Mark 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, which is Putting Your Future Within Reach® with client-centered services.

As a practioner, Mark's past experience includes 15 seasons as president of the Victoria Theatre Association where he inaugurated its famous "You are the star" mission and led its turnaround into a top-30 performing arts center with audiences up five-fold to 900,000, annual income boosted 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 Tony's.

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 is a faculty member at the Mandel Center for Nonprofit Organizations at Case Western Reserve University where he is the 2010 Mandel Center Teaching Award recipient. He holds a BFA from Drake University, an MBA from UCLA, and a Ph.D. from Antioch University.

Acknowledgements

If at first you do succeed – try to hide your astonishment

- Harry F. Banks

On 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 come 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 three boys – William, Michael, and David – and glorious Joni – soul mate, mother, and dear friend.

Part I: Setting the Frame

The chief limitations of humanity are in its visions,

not in its powers of achievement.

- A. E. Morgan

Leading 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.[ix] 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).”[x]

The typical executive faces challenges of “high stress and long hours, anxiety about agency finances, fundraising, and managing people.”[xi] The chief executives of nonprofits – whether called 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.”[xii]

Though many experts on nonprofit bemoan the state of the field,[xiii] 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.”[xiv] As a result, almost all experience a high level of enjoyment in their work.[xv] 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.”[xvi] 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.[xvii]

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.”[xviii] The good news here is that when it comes to working conditions, it’s better than the private sector or government.[xix] 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.”[xx]

Parade’s 2008 annual report on what people make closes by saying, “in any economy, the best jobs provide emotional as well as financial rewards.”[xxi] 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.[xxii] 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.[xxiii]

If it is true that “in our hearts, we would all like to find a purpose bigger than ourselves,”[xxiv] where better to find it then the nonprofit sector? But what if that purpose is embedded in an organization, how do you bring it to life in that context?

This book is about how to do bring an organization’s purpose to life using Results Now. Understanding this quick and practical 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 two makes the case for why you should embrace planning, but not get too carried away with it. Chapter three pulls everything together and introduces the Results Now Master Plan.

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

At a BoardSource conference some years ago, Vartan Gregorian, President of the Carnegie Corporation, told a story about a board member at the University of Pennsylvania from when he was a dean. 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 us, high performance is equivalent to effectiveness.[xxv] And for the late great Peter Drucker in the mid-seventies, the definition couldn’t have been any simpler, “Efficiency is concerned with doing things right. Effectiveness is doing the right things.”[xxvi] The Achilles heel was in knowing what things are 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.”[xxvii]

If you think that defining high performance in the nonprofit sector has been any easier, think again.[xxviii] 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.”[xxix]

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 must inevitably turn to the for-profit sector.[xxx] Certainly this is nothing new. Just ask eBay founder Pierre M. Omidyar who wants to “persuade charities to run like businesses.”[xxxi] 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.”[xxxii]

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.”[xxxiii] Although mice and humans share 99 percent of their genetic code[xxxiv] (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 temping, but it is faulty logic.[xxxv]

First, “effectiveness measures applied in the private and public sectors are significantly different.”[xxxvi] Second, we know, for example, that 64 percent of 1,072 respondents to a national study of nonprofit executive directors were outsiders when they took their position,[xxxvii] inverse to the 36 percent rate of outsiders in for-profit successions.[xxxviii]

Third, we know that “the centrality of mission for nonprofit organizations places limitations on their flexibility of action”[xxxix] 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.”[xl] Perhaps this is why Robert Shriner argues that “Running a non-profit is VERY MUCH HARDER than operating a similar sized for-profit business.”[xli]

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, multidimensional, and emergent. 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 upon how others see you. Multidimensional approaches “recognize that NPOs have multiple performance criteria (related to programs, finances, advocacy, etc.).”[xlii] 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.”[xliii] 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.”[xliv]

The argument here is that nonprofit executive directors should understand that “different constituencies are judging their organizations’ effectiveness in difference 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.”[xlv] Remember the story told by Vartan Gregorian and his board member that begin 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.”[xlvi] 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.[xlvii]

How to operationalize this multiple constituencies approach is straightforward. Step one is to keep in mind that high performance is always an 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.”[xlviii] 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).[xlix]

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.”[l] 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?”[li]

In other words, “You’re either getting better or you’re getting worse each day. There’s no such thing as staying the same.”[lii] 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?’”[liii]

In step two, you don’t ask the stakeholder how the agency is doing with regard to this or that characteristic (e.g. fundraising); you ask instead “how well the organization has been doing on whatever is important to them.”[liv] 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.”[lv] 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.[lvi]

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 same realities of all approaches, “Criteria for judging organizational effectiveness are founded in the preferences and guidelines of individuals. Individual differences preclude consensus regarding one universal set of criteria.”[lvii] 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.”[lviii]

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.”[lix] Melissa Stone and Susan Cutcher-Gershenfeld also found this in a review of ten studies on high performance in nonprofit organizations.[lx] Ditto for Barbara Blumenthal who reviewed over 100 articles on organization high performance and organization change, more than 30 assessments of capacity building, and had interviews with more than a hundred people practiced in capacity building. And which were the most important high-performance factors? She found that “it all depends.”[lxi]

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.”[lxii]

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.”[lxiii]

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.” [lxiv] 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 made 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 with 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 still no hard-and-fast definition through the philanthropic world as to the parameters and indicators of nonprofit effectiveness.”[lxv] Like Kim Cameron’s declaration that “agreement about effectiveness is mainly an agreement to disagree,”[lxvi] 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.”[lxvii]

After reading this, one cannot help but feel sympathy for Sara E. Meléndez – 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.’”[lxviii]

Thus, whether your organization is a high performer is in the eyes of the beholder; the criteria she will use are going to be hers and hers 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 stakeholder thinks. 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’”?[lxix] 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 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.[lxx]

The trick is to do exactly what Robert Herman and David Renz’s recommend and “find out what criteria are important to the different constituencies.”[lxxi] 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.[lxxii] That’s because capacity at the most general level is described as an organization’s abilities to accomplish its mission.[lxxiii]

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,”[lxxiv] a “blend of sound management, strong governance, and a persistent re-dedication to achieving results,”[lxxv] and the “development of an organization’s core skills and capabilities, such as leadership, management, finance and fundraising, programs and evaluation.”[lxxvi]

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.”[lxxvii] 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.”[lxxviii]

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.”[lxxix] 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, training/speaking abilities, technical skills, organizing skills, and other areas of personal and professional development.[lxxx]

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.”[lxxxi] 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.[lxxxii] Barbara Kibbe says that planfulness, effective leadership, and strong governance are the three central features of high performance.[lxxxiii] Christine Letts, William Ryan, and Allen Grossman talk about the ability of organization to fulfill their mission in a dynamic world where they “not only develop programs, but also operate, sustain, improve, and grow them – eventually replacing them with new approaches.”[lxxxiv]

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.”[lxxxv] 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”?[lxxxvi]

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 study[lxxxvii] and Robert Herman and David Renz’s objective effectiveness criteria.[lxxxviii] 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:

Table 1.1 Four Pillars of High Performance

|ADVICE |LEVERS |USES |

| | |PURPOSE |

|- the ability of an organization to define a meaningful mission, mission directed, mission |Mission | |

|statement | | |

|- leadership, effective leadership |Leadership |STRATEGY |

|- adaptable, entrepreneurial, develop programs, customer focused |Strategy | |

|- a persistent rededication to assessing and achieving results, goals or objectives, have a |Planning | |

|strategic plan for the future, organization restructuring, persistent re-dedication 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 | | |

|- cost-cutting, deploy those resources efficiently, finance |Budgeting |OPERATIONS |

|- are good fundraisers, fundraising, generate at least some unrestricted income, generate the |Fundraising | |

|tangible and intangible resources to advance that mission, have a diversified funding base, |Management | |

|sustainable | | |

|- management, management systems, sound management, technology upgrades, use information | | |

|technology such as e-mail and the internet to enhance performance, use data to make informed | | |

|decisions | | |

|- board development, board development, board development/governance, by-laws containing a |Board |Delega|GOVER|

|statement of Purpose, board manual, have a clear understanding with their boards about their | |tion |NANCE|

|respective roles, hold regular board meetings (at least 4 times a year), leadership recruitment,|Staff | | |

|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 | | | |

|- independent financial audit |Finance |Accoun| |

|- description of or form used in CEO performance appraisal evaluation, have experienced |Assessment |tabili| |

|significant growth in demand for their programs and services over the past five years, measure | |ty | |

|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 | | | |

Translating these uses into a graphical representation reveals the Results Now model as shown in Figure 1.1.

Figure 1.1 Results Now Model

| | |

| | |

|STRATEGY |OPERATIONS |

| | |

|Delegation |Accountability |

|GOVERNANCE |

Chapter 2 Planning Rules

Good things only happen when planned;

bad things happen on their own.[lxxxix]

Philip B. Crosby

It should come as no surprise that the foundation of the four pillars has 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.[xc] David Lester goes even further to remind us that the “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?’”[xci]

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.”[xcii] This is true whether it is a solution to an intractable problem, a goal, or dealing with things that need to be done.[xciii]

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,[xciv] which was the same position as it was in 2000.[xcv] The first place position of strategic planning did not change in 2007.[xcvi] Though strategic planning ceded its highest-usage position in 2009 to benchmarking, it still earned top billing for overall satisfaction.[xcvii]

The nonprofit sector reflects the for-profit sensibility to plan and high-performing executive directors wholeheartedly endorse the practice. When 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.[xcviii] 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.[xcix]

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.[c]

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 made even more significant is that help with fundraising is the most sought after by their clients, but it was tied for fifth place with management and human resources.[ci] Though you might be hungry for fundraising, 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”[cii] 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.”[ciii]

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 disciplined approach to planning, including Results Now, have any real value?

Boards and executive directors that are considering engaging in a planning process 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, organizations must be strong and stable while at the same time quick and innovative. The job is complicated and often contradictory:

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).[civ]

Building an organization that can achieve a chosen destiny is a perplexing challenge. The people that 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.[cv]

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 way to address real agency problems.[cvi] The authors of the study suggest that the cause for this “may be that managers are overwhelmed with the problems with which they have to contend, and that may interfere with strategic problem-solving.”[cvii] Or it could be that the 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.”[cviii]

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.”[cix] Add a 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.”[cx]

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 five are less than $500,000, and 45 percent are smaller than $100,000.[cxi] 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.[cxii]

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.[cxiii] 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.[cxiv]

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.[cxv] 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.[cxvi] 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.[cxvii]

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.[cxviii] 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 then right before Thanksgiving when the S&P 500 was down nearly 40 percent to about 750.

Those that 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, “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 at all costs 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.[cxix]

Adding more weight to “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 less 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.”[cxx]

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 sized opportunities without planning.”[cxxi] 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.”[cxxii]

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.”[cxxiii] 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 for 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 of the impossibility of predicting the kind of stability that will eventually emerge.[cxxiv]

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 and 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.[cxxv]

A reactive approach to thinking about the future has validity. Take the case of the Child Care Clearinghouse, a fictional name for an actual nonprofit organization. Two of its biggest strategic changes in recent years for the Clearinghouse occurred serendipitously and were not anticipated as part of any plan. The first was an appeal for assistance to the Clearinghouse’s executive director from the board president of another, smaller agency with a similar mission that happened while standing on a street corner waiting for the walk signal. Ten months later, a new joint program between the two agencies was launched with an annual price tag of $1 million. The program was executed by the smaller agency and promoted by the Clearinghouse and it dramatically changed both organizations for the better.

The second change for the Clearinghouse was even more surprising and coincidental and involved another agency in the same business. On a beautiful spring day, the executive committee of the Children’s Referral Service called to express interest in a possible alliance with the Clearinghouse. That the Children’s Referral Service delivered an outstanding service and was one of the treasures of the community was not in question. That the Children’s Referral Service was going through the most difficult period 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, the board recognized its precarious situation and entered into a management alliance with the Clearinghouse that very summer.

Unfortunately, the alliance came too late to avoid a deficit of $250,000 for the Children’s Referral Service, its biggest loss ever. Client placements hit a rock bottom low at less than 2,600. Coming off a high at over 5,000 in the late 80s that earned the company the status of the State’s best, the condition of the organization just 10 years later was a stunning reversal. Under these circumstances, the company had no choice but to reduce its activities to exclude children above the third grade.

Fortunately, the community of funders applauded the alliance. Through an intensive effort, enough money was raised to pay off Children’s Referral Service’s accumulated deficit, cover losses 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.

Both of these changes for the Child Care Clearinghouse occurred as a result of luck. No visioning process anticipated these opportunities. No strategic planning process covered the possibility of such high-impact opportunities. In the words of former First Lady Nancy Reagan, “Just say no.”

Just Say Yes

As suggested above, 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 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.”[cxxvi] 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 non-planners.[cxxvii] 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.” [cxxviii]

When it comes to nonprofits, Melissa Stone, Barbara Bigelow, and William Crittenden reviewed more than 65 studies representing over 2,000 organizations in nonprofit organizations and did not find a conclusive relationship between planning performance.[cxxix] Though some have seen this as evidence of a weak link between strategic planning and performance,[cxxx] the lack of clarity is because so few of the studies in the meta-analysis sought to examine the relationship between formal planning and performance.[cxxxi] Moreover, Robert Herman and David Renz argue that the “evidence supports the view that strategic planning is related to effectiveness.”[cxxxii]

One of the studies that did examine that relationship was Julie Siciliano’s that 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.”[cxxxiii] This particular study is notable because the studies investigating the link between planning and performance are few are far between.[cxxxiv]

At the most basic level and according to Henry Mintzberg, there is only one reason to engage in planning and that is to “translate intended strategies into realized ones, by taking the first step that can to lead to effective implementation.”[cxxxv] Put another way, “the very Purpose of a plan or the action of planning is to prepare for future activity.”[cxxxvi] Even though he says that “strategies can appear at all kinds of odd times, in all kinds of odd ways, from all kinds of odd places,”[cxxxvii] 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.”[cxxxviii] The problem with this statement is in the word “some” in the first sentence. If visionary companies only make 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 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.”[cxxxix]

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.[cxl] 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.”[cxli] 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.[cxlii]

Back to nonprofits, Michael Allison and Jude Kaye offer two reasons to plan: It improves focus and it improves the way people work together.[cxliii] 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.[cxliv]

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.”[cxlv] Bryan Barry has seven advantages including improved results, momentum and focus, problem solving, teamwork-learning-commitment, communication and marketing, greater influence over circumstances, and a natural way to do business.[cxlvi]

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.

Table 2.1 Benefits and Uses of Planning

|IDEAS |BENEFITS |USES |

|- the analysis, identification, and evaluation of potential strategies, to constantly adjust to |Identify Strategies |Create |

|current events and actions by competitors, greater influence over circumstances, increase | | |

|innovativeness | | |

|- the promotion of strategic thought and action, a framework for action, momentum, focus, |Set Direction |Program |

|program current or new strategies, helping others to think strategically, directly benefit the | | |

|organization’s people, | | |

|- communication media, improved communications and public relations, communication and |Communication Coordinate Action |Implement |

|marketing, prepared minds | | |

|- improves the way people work together, unleash the energy of the organization behind a shared | | |

|vision, teamwork-learning-commitment, improved understanding and better learning, devices for | | |

|control | | |

|- enhanced organizational responsiveness and improved performance, increased effectiveness, |Operational Effectiveness |Achieve |

|increased efficiency, enhanced organizational capacities, improved results, problem solving, a |Enhanced Legitimacy |Results |

|natural way to do business, improved decision making, better decision making | | |

|- increased political support | | |

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.[cxlvii]

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 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.”[cxlviii] And what is Dr. Deming’s recommendation? A plan for the future.

Show Me the Money

In Cameron Crowe’s film Jerry McGuire Cuba Gooding (who won a best-supporting 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 mission is that a four-word sentence, “Show me the money.” In trying to convince Rod Tidwell that it takes confidence plus performance with a touch of humility to win the game, Jerry McGuire’s four-word mission is quite different: “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,”[cxlix] 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.

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 fundraising, a strong case statement always needs to be made. And that goes for both established and emerging agencies:

When [established] 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 well-thought-out plan, something in writing that they can show prospective funders.[cl]

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 fundraising. The difference between fundraising 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 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.[cli] 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.[clii] And don’t forget that three out of five nonprofits do it and management services organizations make it their top field of concentration. 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.[cliii]

This viewpoint that planning is important is the elephant in the board room 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.”[cliv] 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.”[clv]

Woody Allen once said that “Eighty percent of success is showing up.”[clvi] 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.”[clvii] In a different study comparing churches that plan and those that didn’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.”[clviii] Put directly, planning quite literally shows you the money.

Bottom Lines

Even though the two major changes to the Child Care Clearinghouse occurred as a result of luck, the third change came about as a result of carefully thinking about the future. Beginning with market research conducted that concluded, “Families represent the greatest potential for future market growth,” the Child Care Clearinghouse began planning to launch a new referral and shelter service for families. The new service was initiated in a test fashion a year later with full funding and rolled out in a full launch two years later again with full funding guaranteed for the first three years. By 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.”[clix] That someone acting on the organization may not be a board member, may not be 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.

The Child Care Clearinghouse alliance may have arisen by luck, but to manage the opportunity, to make it successful, required a systematic way of thinking. How could the Child Care Clearinghouse team handle the Children’s Referral Service in such deep trouble? How could the board of the Children’s Referral Service, which was known for micro-managing its operations, become more helpful? All these questions would have been sorted out over time one way or another, but Results Now allowed them to be answered in short order.

One way or another, we must have some idea of the direction that the organization should move in. Either that direction is going to come in an orderly fashion through some process or it will be made up as it goes. Actions always indicate the plan behind them or the lack thereof. That plan is either articulated or not, thought out or random. And when everything is said and done, people will have taken action; the question is whether that action fits a clearly articulated direction or is simply the whim of the individual.

Paul Light in his book Sustaining Innovation studied twenty-six 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.[clx]

Having a framework, any framework at all, that deals with these important questions instills a discipline into an organization that can provide a welcome infrastructure that is hospitable to opportunity. The Yogi Berra leadership school of “When you come to a fork in the road, take it”[clxi] clearly applies here. If you don’t know what business you’re in, how can you make effective decisions about that business or new ones that you might enter?

Organizations are in some respects like long-distance runners that must up 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. As such, “success isn’t measured by the number of breakthrough ideas it produces [but] by how well the review helps management forge a common understanding of its environment, challenges, opportunities, and economics, thus laying the groundwork for better real-time strategic decision making.”[clxii] The discipline required of the method 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.

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 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 it 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.

So, here we are at the end of a cursory review of the pros and cons of planning that some will say has been covered succinctly, others ad nauseam, and still others not enough. Here’s the bottom line about planning: 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”,[clxiii] 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”[clxiv]

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 so 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.”[clxv] And Michael Porter asserts that “questions that good planning seeks to answer . . . will never lose their relevance.”[clxvi]

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?[clxvii]

Peter Drucker

The four pillars of high performance – mission, strategy, operations, and governance: delegation and accountability – together generate five essential questions that every organization must answer:

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 falls 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 expert Henry Mintzberg advises, “All viable strategies have emergent and deliberate qualities.”[clxviii] The trick is to find a process that offers enough structure to be Purposeful, but not so much that the organization loses its adaptability. Results Now strikes just the right balance 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 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.”[clxix] 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.”[clxx] 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 the 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 one-two punch of strategic and operating plans. 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 micro-management 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 monitor performance so that the plans wouldn’t end up on a shelf gathering dust. Attempts to find a suitable solution to the governance question often leads to the Policy Governance® model.[clxxi] Developed in the late 70s, the model contains four policy elements: Ends are mission-related and serve as the board’s long-range plan. Executive Limitations clarify boundaries for the staff. Board-Executive Linkage policies are concerned with delegation between board and staff. 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 easier said than done.[clxxii] For example, the critical Ends policies that answer the where to go tomorrow question and drive an organization forward are difficult to construct and then monitor.[clxxiii] And when compared to other solid board development programs, Policy Governance seems to yield similar, but not superior results.[clxxiv]

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 question:

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.

Figure 3.1 Results Now Master Plan

|STRATEGIC PLAN |OPERATING PLAN |

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

|Lines of Business |goals |

|success measures |Budget |

|vision | |

|Delegation |Accountability |

|Who does what? |When did it happen? |

|Duties |Agendas |

|Guidelines |Assessments |

|GOVERNANCE PLAN |

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 that fail to live up to their obligations or executive directors that deliver disappointing performance.

Be Quick

John, a veteran of a board that uses Results Now says that the process “Bozo-proofs 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 correct all the problems. It is a search for symptomatic relief, however. Take boards for example. Maybe they can be bettered 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.[clxxv]

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 make an individual to become proactive, there is the added difficulty for a collective like a nonprofit organization. And what is the end of an agency including its board? Its chosen destiny.

Of course, to achieve a chosen destiny, the chosen 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.

This book will show you how to build a Results Now Master Plan. 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?”[clxxvi] To get to the answer, any effective process has to meet satisfy three requirements.

First, the process used to build the plan must be quick since board members and the 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. 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 or 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.”[clxxvii]

John Wooden once said “Be quick, but don’t hurry”[clxxviii] and this epitomizes Result 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.”[clxxix] 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.”[clxxx]

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 80s:

The project showed, more clearly than could have been hoped for, that the excellent companies were, above all, brilliant on the basics. Tools 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.[clxxxi]

Results Now gets much of its simplicity by 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 upon 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.

The degree of involvement on the part of the board is fluid and depends upon 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 at your particular place in time.

The important point – critically important – about involvement is this: “those who carry out strategy must also make it.”[clxxxii] What this means is that if the staff 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 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 around the order of the five questions. As such, Results Now is big-picture first, details next, and is inherently optimistic about the future. Since the success measures from the strategy 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 the 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?

Part II: Purpose

He who has a why to live for

can bear almost any how.

- Nietzsche

|STRATEGIC PLAN |OPERATING PLAN |

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

|Lines of Business |goals |

|success measures |Budget |

|vision | |

|Delegation |Accountability |

|Who does what? |When did it happen? |

|Duties |Agendas |

|Guidelines |Assessments |

|GOVERNANCE PLAN |

In the opening credits of the Jerry Maguire, Tom Cruise’s character creates a new mission that sets the stage for the rest of the film. As a cut-throat executive in a sports management firm that handles the careers of top athletes, Jerry experiences a crisis one night on the road at a NFL owners meeting in Palm Desert. On this sleepless night, Jerry reflects back upon his life and a variety of incidents including the star player who only signs his sponsor’s brand of baseball cards, the young son of an injured football player who calls Jerry out for not protecting his 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?”[clxxxiii] 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 of 2,120 of the most finely-tuned athletes alive.”[clxxxiv] The mission is straightforward: “Caring for them, caring for ourselves, and the games too.”[clxxxv]

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.”[clxxxvi]

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 4 Values

If you plant ‘Crab’ apples,

don’t count on harvesting ‘Golden Delicious.’

- Folk Saying

Pick 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, eight in ten had lied to a parent about something significant, and two in three had cheated on a test. Surprisingly, nearly all of the participants were satisfied with their personal ethics and character and three in four said that they were better than most when it comes to doing what is right.[clxxxvii]

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?”[clxxxviii]

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.”[clxxxix] Linda Treviño 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.”[cxc]

Bill George, former CEO of Medtronic, begins his 2003 Authentic Leadership succinctly with “Thank you, Enron and Arthur Anderson.”[cxci] Thomas Jones’ 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.[cxcii]

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.[cxciii]

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.”[cxciv]

Getting Real

The common response to news like this is to extol the virtues of value-centered 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.”[cxcv] 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 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.[cxcvi]

Edward Freeman, ranked 39th on Ethisphere’s list of the 100 most influential people in business ethics,[cxcvii] 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.”[cxcviii] Linda Treviño 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.[cxcix]

One of the key findings in the 2007 National Business Ethics Survey was that “ethics risk diminishes when a company adopts an enterprise-wide cultural approach to business ethics,”[cc] 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.[cci]

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.”[ccii] For Edgar Schein, culture comes in three levels.[cciii] 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 even if they did not previously hold that point of view.”[cciv] In other words, the talk before your 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.[ccv]

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.”[ccvi] Other descriptions of authentic include “genuine, reliable, trustworthy, real, and veritable”[ccvii] 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.”[ccviii]

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.”[ccix] Indeed, there is evidence that trust is significantly related to performance[ccx] and an important source of competitive advantage.[ccxi] 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.”[ccxii]

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.”[ccxiii]

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.”[ccxiv] 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 give 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 seventeen-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 to Wicked, not the kids who come for free.

In reality, most of us have “values defaults” just like the word processing programs we use on our computers. I use margins set at one inch, time roman font set at 12 point, footer set at 0.4 inch, tabs set every 0.3 inches, and page numbers at the bottom right. Anyone that uses my computer will get this document format because it is set as my default. Just like the default, I have particular values that govern my behavior. These values are mine and mine alone, not yours, not my organization. In the absence of direction from the organization, the people who work for the organization, the volunteers, and the board members will default to their particular values. Explicitly outlining values gives rise to the possibility that these people will adapt to these values, especially if the values are modeled at the top.

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 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 it out explicitly, promote it 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. Clarifying values at the organizational level is the first step.

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 give 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.”[ccxv]

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. An faith-based organization that believes in the sanctity of their house of worship may want to reconsider teen-night films with R ratings in the church basement.

Table 4.1 lists four organizational values for an agency helping students get ready for college that were generated in about 20 minutes using the BAM process (brainstorming, affinity grouping, and multi-voting) shown in Appendix A.

Table 4.1 College Preparation Agency Values

|Ideas |Results |

|- makes sense, effective, real, achievement, results driven, seamless,|Effective |

|consistent, aligned Purpose, high performance organization, rigor, | |

|focus, sustainable, fundable, doable financially, cost effective (47) | |

|- child centered, global, student input (19) |Child Centered |

|- integrity, equitable, accountability, transparent (15) |Trustworthy |

|- passionate, motivating, engaged, high expectations (13) |High Expectations |

|- buy in, inclusive, shared responsibility, collaborative, shared |Collaborative |

|belief, synergy (9) | |

Most organizations go further and clarify the values more specifically. Table 4.2 for example lists the organizational values for a management service organization.

Table 4.2 Management Service Organization Values

|Ideas |Results |

|- collaboration, team players |1. Collaborative |

|- optimistic, excited, well intentioned, positive, enthusiastic, |a. Optimistic |

|energetic |b. Cooperative |

|- cooperative |c. Effective communicators |

|- good communicators, open, effective communication, 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 outside the |d. Continuous learners |

|box, open to new ideas, open minded, creative, initiative, willing to | |

|learn, flexible | |

|- customer centered, service oriented, user friendly, community |3. Customer centered |

|oriented, concern for community, customer focused, asset to nonprofits|a. Respectful |

|- respectful, show you care, truthful |b. Responsive |

|- responsive to needs, attentive, listen to customer, timely |c. Solution driven |

|- above and beyond, solution driven, asking, solve problems, value | |

|adding, provide quality, provide added quality | |

|- professional, quality, competent, excellence |4. Professional |

|- results driven, execute effectively, have standards, results |a. Results driven |

|oriented, provide value |b. Dedicated |

|- thorough, dedicated, committed, hard work, loyal to mission |c. Knowledge and experience based |

|- knowledge based & experienced, resourceful, works with knowledge, | |

|committed to evidence-based practice, knowledgeable, know the business| |

|- accountable for actions, integrity, trustworthy |5. Trustworthy |

|- fair, consistent, objective |a. Fair |

|- transparency, sharing information |b. Transparent |

|- positive, negative feedback, make problems known, honest |c. Truthful |

|- keep confidences, straight forward, keep commitments, above board, |d. Promises keepers |

|keep word | |

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 over-arching 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-and-experience based decision makers.

▪ We are trustworthy: fair, transparent, truthful promise keepers.

Now that’s talk that you can definitely walk!

Chapter 5 Mission

Starting with the mission and its requirements is the first lesson

business can learn from successful nonprofits.

- Peter Drucker[ccxvi]

That 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:

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 larges one: 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. [ccxvii]

Paul Light in his study of innovative nonprofit and government organizations also found that 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.”[ccxviii]

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.”[ccxix]

Besides the benefit of giving focus, a well-constructed mission is the first step of the strategy stairway that leads ultimately ends in boots-on-the-ground programs.

Mission is also valuable as the “sex drive of organizations.”[ccxx] 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.”[ccxxi] 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.”[ccxxii]

A fourth benefit of a well-crafted mission is to “distinguish one organization for other similar enterprises”[ccxxiii] that “reveals the image the company seeks to project, reflects the firm’s self-concept.”[ccxxiv] As such, it becomes a repository of what the organization sees as its competitive advantage.

A fifth benefit is for communications: “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.”[ccxxv]

It’s not just nonprofits that make good use of mission statements. Jim Collin and Jerry Porras assert that the mission, which they call a firm’s core ideology, is an essential element of successful visionary companies.[ccxxvi] Lending credence to view is the news that mission statements are the number three management tool for two-thirds of global firms.[ccxxvii] Little wonder given the evidence of the relationship between mission statements and financial performance.[ccxxviii]

In sum, the mission is the bedrock of a nonprofit organization. It is the fundamental element in a nonprofit organization’s success. It is the reason for being for the organization, the why of its existence. The mission drives all of the other elements 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 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.”[ccxxix]

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.”[ccxxx]

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 startup 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!

Who are our 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 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.[ccxxxi]

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 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.

In Peter Drucker’s five-question protocol for evaluating “what you are doing, why you are doing it, and what you must do to improve”[ccxxxii] begins with mission and is immediately followed by “Who is our customer?”[ccxxxiii] He gets at the answer by addressing the following two relevant topics: “Who is our primary customer? Who are our supporting customers?”[ccxxxiv] He defines the two types of customers this way

The primary customer is the person who 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.[ccxxxv]

The most important aspect of the customer question for Peter Drucker who warns 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.”[ccxxxvi]

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 BAM process shown 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 word-smithing. Word smithing 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.

Table 5.1 Camping Agency Mission Primary Customer

|Ideas |Results |

|- youth in our community, schools, other youth groups, future business|Youth in our community |

|leaders (63)[ccxxxvii] | |

|----- 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 which of the grouping truly represented the customers for the agency.

What difference do we make?

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 be doing is saying what difference the agency is going to make 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. Later on in the process, more detailed customer differences are articulated to form lines of business, which are the agency’s products, services, programs.

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 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 is about the programs and services that the Chamber provides, not about what difference is 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 business 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).

Table 5.2 Camping Agency Mission Difference

|Ideas |Results |

|- character, relationship with God, sense of honesty, values, value |Character-centered |

|system, integrity (40) |Skills good for life |

|- skill set for life, success in life, experience, special skills, | |

|well rounded (30) | |

|----- 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| |

How are we better than our rivals?

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 from other firms of its type.”[ccxxxviii]

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. Although improving the operations of your organization to be a best practice is essential, it is not enough to become high-performing.[ccxxxix] Competitive advantage is the “presence of visible, obvious, and measurable ways in which your organization differs from and is better than its peers.”[ccxl] And you want that advantage to be sustainable over time because your organization can “outperform rivals only if it can establish a difference that it can preserve.”[ccxli]

Why should you care about your advantage? Though you might believe you’re special, your customers, stakeholders, and especially funders may respectfully disagree. When they review your appeal, they may perceive you to be a lot like your peers. And if there’s discernable difference, you may end up on the short end of the stick. As painful as it be to learn and 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.”[ccxlii]

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 in. We had to decide what shows would be chosen for the season coming up nine months later, technology systems and offices had 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 where to go tomorrow.

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 the differences required substantially different levels of risk and effort.

One of the hottest shows at the time was Les Misérables. 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 for doing it in the coming season was equal to our entire budget for the one we were currently doing. That’s called a white-knuckle ride, betting the ranch, burning your boats.

The vote to go with “the” was not easy, but the board knew the risks and 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 LL Bean’s approach to customer service, we decided that standing ovation experiences for our customers was how we were going to be different.

Now a competitive advantage wouldn’t be worth much if it only distinguished you from others; it has 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 new performing arts center complex grew from 22,000 to over 900,000 while revenues under management were went up 21-fold to $21 million.

Do I seriously attribute our success to a competitive advantage of 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 hurtle that in turn forced us to commit to a competitive advantage of standing ovation experiences. That built loyalty with our customers of such 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 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.”[ccxliii] 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.”[ccxliv]

How do you find your competitive advantage, the difference that you can set you apart from others? Expert David La Piana recommends that you go about it this way:

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

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

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.[ccxlvi]

My experience with standing ovation experiences was much less formal; we liked LL 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, o highest quality.

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 win. If you have singled out one advantage and pound away at it, you just might pull it off. Table 5.3 shows the results from the outdoor camping organization.

Table 5.3 Camping Agency Mission Advantage

|Ideas |Results |

|- delivers skills for life, everyone succeeds, strong rank advance |Everyone succeeds |

|program, long-term relationships (34) | |

|----- 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) | |

The 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.[ccxlvii]

When you’ve answered the three questions shown above, you can finally put your mission statement together where it becomes the sweet spot of your Result Now Master Plan, that one sentence that Dan Pink refers to.

As simple as it sounds, constructing that one sentence is a matter of putting your answers to the three questions together in a way that makes works for you. The mission for 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.”[ccxlviii]

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 statement from a Big Brothers – Big Sisters chapter that is shown in Table 5.4.

Table 5.4 Old versus New Mission

|Old mission |Mission Element |New mission |

|Children and youth |Who |7-13-year-old children from at-risk, |

|Committed to making a positive difference, assist them|What difference |single-parent households |

|in achieving their highest potential, grow to become | |builds confident, competent, and |

|confident, competent, and caring individuals | |caring young adults |

|primarily through a professionally supported |How different |through professionally supported |

|one-to-one relationship | |one-to-one matches |

| | |that deliver results |

|Complete Statements |

|Old mission |New mission |

|Committed to making a positive difference |Building 7-13-year-old children |

|in the lives of children and youth, |from at-risk, single-parent households |

|primarily through a professionally supported |into confident, competent, |

|one-to-one relationship, |and caring young adults |

|and to assist them in |through professionally supported |

|achieving their highest potential |one-to-one matches |

|as they grow to become |that deliver results |

|confident, competent, and caring individuals. | |

|Haiku |

|1-to-1 matches transform |

|at risk children |

|into strong young adults |

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 in 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 stationary, on business cards, and on T-shirts. For the Big Brothers – Big Sisters chapter, the mission summary is Building Young Adults.

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 MS 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 performing arts center I led that wanted to be the best with an advantage of standing ovation experiences choose you are the star. It was in place for many years, published on T-shirts, on jackets, stationary, 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 employee 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 deliver 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:

Bringing the community together with resources to help (Summary

We bring the community together to provide resources (How better

that help people in need or at risk (Who

solve their problems. (What difference

A home within reach (Summary

We are the “go-to” organization (How better

that puts the American dream of a home within reach (What difference

for people with low to moderate incomes. (Who

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

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.”[ccxlix] 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.[ccl]

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 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 MVP 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’-3” 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)[ccli] – was to play in the NBA. Never mind that this was a stretch quite literally compared to someone like Yao Ming at 7’-6” tall.

Some would say just the opposite; 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 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 his 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)[cclii]

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.

Part III: Strategic Plan

If you don’t know where you’re going,

you might wind up someplace else.

- Yogi Berra

|STRATEGIC PLAN |OPERATING PLAN |

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

|Lines of Business |goals |

|success measures |Budget |

|vision | |

|Delegation |Accountability |

|Who does what? |When did it happen? |

|Duties |Agendas |

|Guidelines |Assessments |

|GOVERNANCE PLAN |

The Strategic Plan 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. The Strategic Plan concludes with the creation of a vision that depicts the aspirations for major new undertakings like launching a new line of business, professionalizing fundraising, initiating a company-wide intranet, or undertaking a major capital campaign for a new facility.

The Strategic Plan is meant to advance the organization’s Purpose. This is why the gurus of strategy like Michael Porter often talk about competitive strategy.[ccliii] 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.”[ccliv] 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.”[cclv] 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 Figure III.1.

Figure III.1 The Conventional Order

|Create |Program |Implement |Achieve Results |

|Identify Strategies |Set Direction |Communicate the Plan Coordinate |Operational Effectiveness Enhanced |

| | |Action |Legitimacy |

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 . . . all viable strategies have emergent and deliberate qualities.”[cclvi]

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 Figure III.2).

Figure III.2 A Better Order

|Program |Implement |Achieve Results |Create |

|Set Direction |Coordinate Action Communicate the |Operational Effectiveness Enhances |Identify Strategies |

| |Plan |Legitimacy | |

| | | | | | |

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 the 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 from Community Wealth Ventures that found the average time from launch to profitability was 2.5 years.[cclvii]

Strategy guru Michael Porter suggests that three questions be addressed in the process of building competitive strategy: “What is the Business Doing now? What is Happening in the Environment? What Should the Business be Doing?”[cclviii] 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 a discussion of the lines of business in Chapter 6 followed by a review of the success measures in Chapter 7 and concludes with the vision in Chapter 8.

Chapter 6 Lines of Business

The human tendency to regard little things as important

has produced very many great things.

- G. C. Lichtenberg

Though it is true that the Purpose is the heart of the agency, it only begins to beat in the Strategic Plan. 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 strategic approaches.[cclix] 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 Downs 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 are what 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.

What Are We Doing Now

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.[cclx]

Lines of business are different from other activities within the organization because they are ends, not means. They must stand the customer-difference 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 program 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 identified shows 14 lines of business:

Research

Resource Development

Nurturing children

Strengthening families

Building communities

Eliminating abuse

Heartland

Encouraging self-sufficiency

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).[cclxi]

By grouping the lines of business by theme, the United Way was able to group 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 6.2: A local United Way’s Lines of Business

|Research |Resource Development |Resource Distribution |Initiatives |

|Problems identified and |Amplifying the impact of |Funding for high-impact |Leading solutions for others in need |

|prioritized |giving for donors who |problem-solvers directly | |

|for others in need |want to help others in |help others in need | |

| |need | | |

| | | | | | | |

| | | |Management Services |Heartland Fostering |

| | | |Incubating high-impact problem |high-impact problem solvers |

| | | |solvers |in non-urban areas |

| | | |Baby Steps |Outcomers |

| | | |Immunization Track |Teaching high-impact problem |

| | | |Pre-School-Jump-Start |solvers how to be use |

| | | |Links |outcomes measurement Labor |

| | | |The web link to high-impact |and Community Services |

| | | |solutions for others in need |High-impact solutions in the |

| | | | |workplace |

|Nurturing children | | |

|Strengthening families | | |

|Building communities | | |

|Eliminating abuse and neglect | | |

|Encouraging self-sufficiency | | |

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.

On the other hand, many people treat fundraising as a line of business because of its importance to the organization. After all, most lines of business only reach breakeven with the help of contributed income delivered through direct support or from the annual fund..[cclxii] Especially with regard to general operating support, fundraising 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.

Table 6.2 Fundraising as a Line of Business

| Development |

|The joy of giving |

|to help others in need |

|for those with a generous heart |

|in our diverse community |

|Individuals |

|Corporations |

|Foundations |

|Special Events |

|Planned Giving |

Another example of an activity that is a means to end but that could be considered a line of business is selling Girl Scouts 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 both in helping build confidence for the girls as well as enjoying delicious cookies. In other words, Girl Scouts cookies feed the soul and the sweet tooth.

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 detailing within lines of business – including how many lines you have – should stop when it becomes difficult to develop reasonable customer-difference statements. Table 6.3 and Table 6.4 shows the lines of business for two different organizations.

Table 6.3 Big Brothers – Big Sisters Chapter

|Core Match |High School Mentoring |Teen Mothers |

|Building 7-13-year-old Littles |Building 15-17-year-old Bigs |Building pregnant and |

|into confident – competent – caring young |into confident – competent – caring young adults|parenting teens into |

|adults | |confident – competent – |

| | |caring parents |

Table 6.4 MS Chapter Lines of Business

|Newly Diagnosed |Research |Support Groups |

|You’re not alone |Ending the devastating effects for those living|Living the fullest life possible for those |

|for those newly diagnosed |with MS |living with MS |

|MS Peer Connection | | |

|Moving Forward | | |

|Knowledge Is Power | | |

| |Update Education |Direct Disbursements | |

| |Staying current |Solutions | |

| |for those living with MS |for those without means | |

| |Fall Education Conference |Equipment | |

| |National Television Conference |Direct Counseling | |

| | |Referral Counseling | |

As shown in the examples above, the preferred way to describe the lines of business is with brief customer-difference statements of no more than six to eight words in length. Sometimes the statement includes the customer and the difference; sometimes organizations will use descriptions that are more about products or services as demonstrated in the fair housing agency example in Table 6.5.

Table 6.5 Fair Housing Agency Lines of Business

|HOUSING DISCRIMINATION |PREDATORY MORTGAGE LENDING |

|Education & Outreach |Education & Outreach |

|General Public |General Public |

|Individuals are more aware and |Individuals are aware and |

|assert their fair housing rights |avoid becoming victims |

|Housing Providers/Professionals |Housing Providers/Professionals |

|Individuals and companies are better educated, |Individuals and companies are better educated, and assist in |

|and greater compliance is achieved |protecting customers |

|Enforcement |Intervention for Victims |

|Meritorious complaints are identified and |Residents’ rights are asserted and |

|violations are challenged & proven |remedies are achieved |

|Research/Advocacy |Research/Advocacy |

|Problems & barriers are |Problems are |

|identified, prioritized, publicized |identified, prioritized, publicized |

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 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 7 Success Measures

What you measure is what you get.

- Robert Kaplan and David Kaplan[cclxiii]

As is the case with lines of business, success measures are used to answer Michael Porter’s question of “What is the Business Doing now?”[cclxiv] 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 Unmeasurable

If a shareholder wants to know how a for-profit company is doing, she typically takes the measure at the bottom line. Whatever this bottom line is called, be it shareholder wealth, net profit, share price, or return on investment, for-profits depend on financial information as a fundamental measure of their success. Nonprofits, on the other hand, are almost anti-financial 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.”[cclxv]

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 to mission, not financial returns.”[cclxvi] He’s not alone in this opinion. Indeed, 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.”[cclxvii] 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.”[cclxviii]

No discipline? Lacking in self-interest? These viewpoints fall far short of the reality. Exemplary nonprofits depend upon measurable results to determine effectiveness including financial results. 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.’”[cclxix] At about the same time, Peter Drucker asserted that “nonprofit enterprises are more money-conscious 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.”[cclxx] 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.[cclxxi]

To be fair, it’s not that nonprofits don’t have measures; it’s just that many aren’t financial or written down. Furthermore, nonprofits often have measures based in 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.”[cclxxii]

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.”[cclxxiii] That said, this viewpoint is increasingly seen as a copout; it is possible to measure such things and the best nonprofits do it regularly. Take appreciation of art and music 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 that 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 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.[cclxxiv] Even better, this platform of success measures is readily available and usually pre-approved by the board.

Third, success measures provide meaningful information that can make fundraising 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”?[cclxxv] 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. 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.”[cclxxvi] 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 arises 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.”[cclxxvii]

Table 7.1 shows selected lines of business success measures for a Girl Scouts 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 Scouts Council Selected Lines of Business Success Measures

| |Year Before Last|Last |This |Next Year |Year After Next |

| | |Year |Year | | |

|Girl Scout Troops: Total |15,999 |17,499 |18,244 |18,429 |19,000 |

|Retention |10,254 |11,322 |11,817 |11,902 |12,000 |

|New |5,745 |6,177 |6,427 |6,527 |7,000 |

|Diversity |3,317 |4,800 |4,976 |4,976 |5,000 |

|Daisies: Total |824 |550 |980 |1,006 |1,100 |

|Retention |31 |37 |0 |6 |35 |

|New |793 |513 |980 |1,000 |1,050 |

|Diversity |26 |34 |75 |101 |120 |

|Brownies: Total |5,218 |5,268 |5,450 |5,476 |5,450 |

|Retention |3,624 |3,550 |3,720 |3,726 |3,500 |

|New |1,594 |1,718 |1,730 |1,750 |1,800 |

|Diversity |445 |465 |482 |533 |500 |

Notice that the last two columns to 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 of “What Should the Business be Doing?” [cclxxviii]

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.”[cclxxix] 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.

Table 7.2 Performing Arts Agency Selected Lines of Business Success Measures

|(in thousands) |

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.”[cclxxxi]

Notice that the current ratio, which "matches the short-term assets of an organization with liabilities that it expects to face,"[cclxxxii] 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 IRS Form 990s in success measures? From a reliability standpoint, they provide a good deal of information and are “a reliable source of information for basic income statement and balance sheet entries.”[cclxxxiii] 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. 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 at much earlier when the deficit was more manageable.

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.

Table 7.5 Regional Theatre Lines of Business Success Measures

|(in thousands) |Year 3 |Year 2 |Year 1 |This Year |Next Year |

| | |

|- simple and idealistic; simple enough to be communicated clearly in five minutes or less; a picture of a |Idealistic |

|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, |Pragmatic |

|addresses basic assumptions about what is important for the organization; focused enough to guide decisions and | |

|actions; general enough to allow initiative and creativity | |

The idea that there might be two primary types of vision is hardly ground-breaking news among practioners. 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.[cccxxiv]

Nor is this paradoxical blend unusual in the literature. For example, Glenn Rowe argues that strategic leaders show a “synergistic combination of managerial [pragmatic] and visionary leadership [idealistic].”[cccxxv] This is consistent with Jim Collins and Jerry Porras’ 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.”[cccxxvi]

My study of 16 exemplary nonprofit leaders in Dayton, Ohio found that the concept of vision resonated strongly and that most supported vision was to always accomplish the mission. This was followed with a tie for second place between be more financially sound and be the best at what you do.[cccxxvii] 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 picture of the future is the idealistic vision statement; the strategies that bring it to life are the pragmatic vision strategies.

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.”[cccxxviii] 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.”[cccxxix] Jay Conger observes that 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.”[cccxxx]

Most people don’t want to wait for whispers, 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.”[cccxxxi] 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.”[cccxxxii] 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.[cccxxxiii]

The brevity of this summary belies the effort required. For example, John Bryson’s approach for nonprofits is a 10-step process:

1. Initiate and agree upon a strategic planning process.

2. Identify organizational mandates.

3. Clarify organizational mission and values.

4. Assess the organization’s external and internal environments to identify strengths, weaknesses, opportunities, and threats.

5. Identify the strategic issues facing the organization.

6. Formulate strategies to manage these issues.

7. Review and adopt the strategic plan or plans.

8. Establish an effective organizational vision.

9. Develop an effective implementation process.

10. Reassess strategies and the strategic planning process.[cccxxxiv]

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.[cccxxxv]

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 strengths and weaknesses portion of the process “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?”[cccxxxvi]

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.”[cccxxxvii] Indeed, nonprofit planning expert John Bryson notes that SWOT analysis “does not offer specific advice on how to develop strategies, except to note that effective strategies will build on strengths, take advantage of opportunities, and overcome or minimize weaknesses and threats.”[cccxxxviii]

Ultimately, making vision requires that you “see and to feel . . . it requires a mental capacity for synthesis.”[cccxxxix] This is certainly true of Amar Bhide’s study that found “many successful entrepreneurs spend little time researching and analyzing.”[cccxl] 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 five percent came from going with the flow of their industry.[cccxli]

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, well-meaning family doctor who inadvertently gets you thinking about disease when you should be thinking about health.[cccxlii]

This view not only shows up in planning literature, it also appears in advice on career building.[cccxliii] Don’t take the “path of most resistance”[cccxliv] says Tom Rath of Clifton StregthsFinder fame, but instead understand that “the key to human development is building on who you already are.”[cccxlv] You want to prepare your mind for visioning; you want stay positive where insights are more probable.[cccxlvi] 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.”[cccxlvii]

Think back to Muggsy Bogues. If he had used SWOT, he would never have played basketball let alone been a 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 as their solution to his problems. Do what you love; love what you do is not the typical outcome of the SWOT model. That’s why you should “Swat the SWOT,” says Tom McLaughlin.[cccxlviii]

Still, some will worry about missing something important by not doing a SWOT analysis, but don’t fret too much. You’ll have plenty of time to do it on the back end. SWOT appears to be better as criteria for examining the quality of your strategies once formed; the backside of the process in, not the beginning.

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.”[cccxlix] This is consistent with Michael Porters three-step approach to strategy making that begins with “What is the Business Doing now?”[cccl]

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: [cccli]

1. Reaffirm your purpose

2. Listen to your customers

3. Know the best of best in your field

4. 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-and-experience 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 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.[ccclii]

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 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”[cccliii] 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?”[cccliv] 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?”[ccclv]

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 are 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.

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.[ccclvi] 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.[ccclvii] 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 customer voice.

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-to-eye understanding typically requires research whether qualitative up-front-and-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?”[ccclviii] He defines the two types of customers this way

The primary customer is the person who life is change 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.[ccclix]

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 life-changing 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.[ccclx]

But even this doesn’t quite get at customer voice. The most important advice Peter Drucker gives about customers is about staying 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 and again you will have to ask, ‘Who is our customer?’ because customers constantly change.”[ccclxi]

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.[ccclxii]

One of the best ways to get close to your customers is to do exactly that. Yes, you can commission rich and rewarding research, 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 begin by asking 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 should do to improve this or that aspect of your services, products, or programs because this is hard for 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. 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.”[ccclxiii]

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.”[ccclxiv] 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.[ccclxv]

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.”[ccclxvi] 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.”[ccclxvii] You seek out those firms 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, everything, and anything that might be the source for 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.”[ccclxviii]

What do you do with all this wonderful information? Why initiate it of course. Don’t forget that seven out of 10 ideas in the Amar Bhide’s study of entrepreneur founders came from an earlier job.[ccclxix] This goes for nonprofits as well. A recent study on nonprofit innovation from Lester Salamon, Stephanie Geller, and Kasey Mengel surveyed 417 nonprofit organizations and found the most common way to learn about innovations was from peer organizations.[ccclxx]

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 them 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 lower than this 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 Renée Mauborgne for example who 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.”[ccclxxi]

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.[ccclxxii] In other words, when “pessimistic opinions are suppressed, while optimistic ones are rewarded, an organization’s ability to think critically is undermined.”[ccclxxiii]

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 not-for-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.[ccclxxiv]

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,[ccclxxv] 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 ten symptoms of a dysfunctional organization:

1. Lack of a strategic plan

2. A narrow fundraising base

3. Productivity slowdown

4. Staff-board breakdown

5. Fear of change

6. Poor communication

7. Declining morale

8. Financial instability

9. Unhappy customers

10. Loss of key people[ccclxxvi]

Depending upon 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 Brinkerhoff’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?[ccclxxvii]

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:

▪ Have you been profitable the past 3 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?[ccclxxviii]

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.[ccclxxix]

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.”[ccclxxx] 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)

▪ 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)[ccclxxxi]

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 picture of the future is the vision statement that is typically idealistic in texture; the vision strategies that bring the picture to life are typically pragmatic. The vision statement is a “guidepost showing the way.”[ccclxxxii] It doesn’t have to be lengthy or particularly descriptive; it is a guidepost, not a roadmap. 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 ten questions as part of a visioning exercise:

▪ How would the world be improved or changed if we were success in achieving our Purpose?

▪ What are the most important services that we should continue to provide, change or begin to offer in the next three years?

▪ What staffing and benefits changes do we need to implement to better achieve our Purpose?

▪ What board of directors changes do we need to implement to better achieve our Purpose?

▪ What resource development (fund-raising) changes do we need to implement to better achieve our Purpose?

▪ What facilities and technology changes do we need to implement to better achieve our Purpose?

▪ What infrastructure, systems or communication changes do we need to implement to better achieve our Purpose?

▪ How could we more effectively or efficient provide our services? If you could only make three changes which would significantly impact our ability to provide quality services to our clients/customers, what would those changes be?

▪ What makes us unique (distinguishes us from our competition)?

▪ What do our clients/customers consider most important in our provision of services? What do our customers need from us?[ccclxxxiii]

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?[ccclxxxiv]

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.”[ccclxxxv] 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.”[ccclxxxvi]

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?[ccclxxxvii]

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.”[ccclxxxviii] 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 five years? Using the BAM process shown in Appendix A generated the results shown in Table 8.2 for a fair housing agency.

Table 8.2 Fair Housing Agency Statement

|Ideas |Results |

|- fair housing education before enforcement, proactively address fair |Comprehensive solutions |

|housing issues in the community, most comprehensive help solutions to | |

|fair housing issues in region, impact discrimination in community on | |

|systemic level | |

|- best of, premier provider of housing discrimination assistance |Best practice nationally |

|nationally, 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, strong advocacy/enforcer for fair housing in | |

|region, funding base to allow business line growth, the expert on | |

|housing issues, experts on systemic enforcement, “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 | |

Notice that the question of what takes us forward delivered results about lines of business (comprehensive solutions) and also delivered results about operational effectiveness (best practice nationally). Paradoxically, the question of what takes us forward also frequently answers the question of 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 it comes to the organization; others think about idealistic possibilities.

Asking the second question of what holds us back is still a good idea because you may want the information later on when you decide whether to more the strategy forward. The central idea is to understand the capacities of the organization that will stand in the way of a successful future. Therefore, there must be a sincere willingness on the part of the participants to look at those obstacles holding the organization back. Table 8.3 shows the obstacles identified by a United Way agency.

Table 8.3 United Way Obstacles

|Ideas |Results |

|- lack of education about United Way, perception, lack of |Lack of clarity in the community about United Way |

|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 |Stagnation |

|- inefficiency of not giving directly, community foundation, watch |Competition for funds |

|market share, competition for funds, give directly, unpredictability | |

|of donor choice | |

|- number of volunteers, quality of leadership, less volunteer time |Availability of volunteers |

|- county perspective versus regional perspective, changing employee |County perspective versus regional needs |

|base, lack of county involvement, limited service delivery | |

|- changing companies, lack of corporate pledge increases, employer |Economic environment |

|ratio, economic realities of community, lack of leadership giving | |

|expertise | |

|- agency versus United Way attitudes |Agency relations |

Here are idealistic 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

▪ 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?[ccclxxxix]

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 the Operating Plan. You can make vision strategies something to be explored when there’s more time to 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?”[cccxc]

Chapter 9 Vision Strategies

Vision is the art of seeing the invisible.

- Jonathan Swift[cccxci]

Who 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 almost 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.”[cccxcii] 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

Vision strategies typically revolve around what takes your forward in the form of lines of business and what holds you back in the form of operational effectiveness 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 expanding your back-office infrastructure.

Just who should be tasked with doing the work of identifying possible strategies? Most organizations will use the BAM approach with everyone around the table because it 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

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 ah-ha 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. Sometime 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.

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 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.[cccxciii] 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.

Table 9.1 Ideas from Vision Statement BAM Process

|Ideas |Results |

|- fair housing education before enforcement, proactively address fair |Comprehensive solutions |

|housing issues in the community, most comprehensive help solutions to |Launch fair housing education program |

|fair housing issues in region, impact discrimination in community on | |

|systemic level | |

|- best of, premier provider of housing discrimination assistance |Best practice nationally |

|nationally, 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, strong advocacy/enforcer for fair housing in | |

|region, funding base to allow business line growth, the expert on |Strengthen advocacy |

|housing issues, experts on systemic enforcement, “go to” place for |Strengthen fundraising capacity |

|victims, known as leading agency for foreclosure prevention, | |

|nationally recognized organization for dealing with housing |Strengthen marketing capacity |

|discrimination and education, best known expert on housing | |

|discrimination | |

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.

Table 9.2 Vision Strategies for a Museum

|Ideas |Results |

| |Statement |

|- leading museum worldwide, redevelopment to an organization |Iconographic |

|recognized for design, architecture, programming, and organizational | |

|excellence, international recognition, recognized for our programs, | |

|iconographic, unparalleled reputation worldwide | |

| |Strategies |

|- financial security, in place to celebrate the centennial, standard |Financially Secure |

|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, |Best Attended |

|entertainment, and meeting ground, international draw | |

|- unique design leader, innovative design ideas |Innovative Design Ideas |

|- education bent, education partnerships especially with universities,|Leader in Learning |

|catalyst for heightened education pride regionally, leader in | |

|learning, driver four community image with regard to schools | |

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 post-opening 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

▪ 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 categories[cccxciv] plus two more from J. Gregory Dees:

1. Creating a new or improved product, service, or program

2. Introducing a new or improved strategy or method of operating

3. Reaching a new market, serving an unmet need

4. Tapping into a new source of supply or labor

5. Establishing a new industrial or organizational structure

6. Framing new terms of engagement [e.g., customer satisfaction guarantees]

7. Developing new funding structures [e.g., franchising][cccxcv]

J. 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 your 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 could improve the way you operate?[cccxcvi]

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:”[cccxcvii]

1. to modify the nature of a program, particularly to improve quality;

2. to add a new program;

3. to withdraw from programs;

4. to increase the number of people to whom programs are delivered; and

5. to secure more resources.[cccxcviii]

A four-question approach is contained in the widely-used Ansoff Matrix based upon 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.”[cccxcix] Table 9.3 shows what the Ansoff Matrix looks like.

Table 9.3 Ansoff Matrix

| |Current products |New products |

|Current |Market Penetration: |Product Development: |

|Markets |current products to more customers like |new products |

| |current customers |to current customers |

|New |Market Development: |Diversification: |

|Markets |current products to |new products |

| |new kinds of customers |to new kinds of customers |

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.[cd] 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.”[cdi]

Table 9.4 illustrates a different matrix suggested by Scott Helm’s work around current thinking about earned income strategies:[cdii]

Table 9.4 Earned Income Matrix

| |Sustaining Strategy |Disrupting Strategy |

|Earned |Commercial |Commercial |

|Income |Non-Entrepreneurial |Entrepreneurial |

|Unearned |Noncommercial |Noncommercial |

|Income |Non-Entrepreneurial |Entrepreneurial |

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.”[cdiii]

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.[cdiv] 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.”[cdv] Thus Paul Nutt suggests that leader 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.”[cdvi]

The way in which vision statements and strategies are finalized and readied for feasibility studies can range from simple to complex, from “Take it to Vegas” multi-voting style in the BAM process to more nuanced ranking matrixes, 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.”[cdvii]

Intuitive and Analytic

Many decisions we make are characterized by a “ready, fire, aim” variety so popular especially with entrepreneurs.[cdviii] And why not? In his best-selling 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.[cdix]

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.”[cdx]

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.”[cdxi] 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, on the other hand, 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 a 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).”[cdxii] 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.[cdxiii]

Though simple matters are best decided through conscious thinking, we should “delegate thinking about complex matters to the unconscious.”[cdxiv] 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.[cdxv]

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.”[cdxvi] And as Herbert Simon argues, the effective manager must be capable in both decision making approaches – the analytic and intuitive.[cdxvii] In other words, use your head and your gut, but don’t trust either exclusively.

Directive and Participative

Individuals do not make decisions in a vacuum when it comes to organizational life. As such, issue isn’t so much how to make the decision – analytic or intuitive, fast or slow – but who should be involved. 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.”[cdxviii] If you need lots of acceptance, go slower; if you don’t need it, go as fast as you want.

Other decision models use 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 model[cdxix] has two variables – the decision quality and subordinate acceptance – and three decision making styles – directive, consultative, and group. Generally simplified, if subordinates’ acceptance is not important or everyone will agree with whatever you decide, you make the decision. If you need acceptance, delegate the decision to the group if the decision quality isn’t important. If you need acceptance and the decision quality is important, consult the group, but make the decision yourself.[cdxx]

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.[cdxxi] 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.[cdxxii] The Chinese proverb is really 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.”[cdxxiii] 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.”[cdxxiv]

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.

Start, Stop, and Continue

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 ten new ideas.

All of these strategies were evaluated by the board and staff and the decision was made to reduce the volume to 10 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.[cdxxv]

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 to a course of action because of what they’ve put into it and despite knowing it is a lost cause.[cdxxvi] 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 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.”[cdxxvii]

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 ubiquitous Growth-Share Matrix from the Boston Consulting Group shown in Table 9.5.[cdxxviii]

Table 9.5 Growth-Share Matrix

| |Relative Competitive Position (Market Share) |

| |High |Low |

|Business |High |“Stars” |“Question Marks” |

|Growth | | | |

|Rate | | | |

| |Low |“Cash Cows” |“Dogs” |

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 Mohr[cdxxix] that some people call the Double bottom line Matrix shown in Table 9.6.

Table 9.6 Double Bottom Line Matrix

|Financial |Positive |Sustaining |Beneficial |

|Returns | |(Necessary evil?) |(Best of all possible worlds) |

| |Negative |Detrimental |Worthwhile |

| | |(No redeeming qualities) |(Satisfying, good for society) |

| |Low |High |

| |Benefits (Social Value) |

A more nuanced and prescriptive three-step portfolio analysis tool is the MacMillan Product Matrix shown in Table 9.7.[cdxxx]

Table 9.7 MacMillan Product Matrix

| |Step 1 |

| |Determine Program Attractiveness |

| |High |Low |

| |Step 2 |

| |Determine Alternative Coverage |

| |High |Low |High |Low |

|Step 3 |Strong |Aggressive Competition |Aggressive Growth |Build Up the Best |Soul of the Agency |

|Determine | | | |Competitor | |

|Competitive | | | | | |

|Position | | | | | |

| |Weak |Aggressive Divestment |Build Strength or Sell |Orderly Divestment |Foreign Aid or Joint |

| | | |Out | |Venture |

In step one, 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).

Step two is to determine alternative coverage, which simply means the number of agencies with similar programs. In step three, you determine competitive position, which requires “some clear basis for declaring superiority over all competitors.”[cdxxxi] By following these steps, you are to locate your program within the corresponding cell and take the recommended action.

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.”[cdxxxii]

Among the fast methods for deciding are the weighted multi-voting “Take it to Vegas” multi-voting approach discussed in Appendix A, but it’s not the only one. Another quick tool is the Payoff Matrix popularized at General Electric and shown in Table 9.7[cdxxxiii]

Table 9.7 Payoff Matrix

| |Easy to Implement |Tough to Implement |

|Small |Quick Wins! |Time Wasters |

|Pay-Off |(QW) |(TW) |

|Big |Bonus Opportunities |Special Efforts |

|Pay-Off |(BO) |(SE) |

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.[cdxxxiv] Step one is to decide what decision criteria you’ll use. Next you can weigh the importance of each criterion. Third, you vote and tally. Table 9.9 is the output from a ranking of lines of business against weighted selection criteria chosen in a BAM process at a human service organization.

Table 9.9 Weighted Decision Matrix

|Decision Criteria | |Strategies |

| |WT |

|Delegation |Accountability |

|Who does what? |When did it happen? |

|Duties |Agendas |

|Guidelines |Assessments |

|GOVERNANCE PLAN |

When 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’s 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 to in a back-stabbing 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 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.”[cdxxxviii]

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 2009 draft pick was a quarterback, but the number two was an offensive tackle. So what does this have this got 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 organization desire and strive to achieve.”[cdxxxix] 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”[cdxl]

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 earth-shattering 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.”[cdxli]

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,”[cdxlii] 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.[cdxliii]

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.[cdxliv]

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 description-like 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 of all nonprofits have five or fewer.[cdxlv] 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 on-going activities and have only 5 percent of disposable time . . . if that. Only the major, high-impact 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 highly creative process that characterizes the Strategic Plan, the Operating Plan is developed in a more mechanical, step-by-step approach to render the two sections of goals and Budget.

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.

- Barnard Baruch

Call it an objective, tactic, or target; an Operating Plan goals should do just one thing: achieve a meaningful result. In the case of the Operating Plan, that result is typically an improvement or innovation for the organization at the department level. Again, goals in the Operating Plan do not describe the on-going day-to-day activities of the organization or the job duties of individuals. Put another, way, goals are not a policies and procedures manual; 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 depend from organization to organization and upon the specific circumstances. In the recent economic turbulence for instance, many nonprofits found a decline of 10 percent in fundraising results a significant accomplishment.

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 time and organizational capacity. In fact, it 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 for 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.”[cdxlvi]

Department Map

Step one in the process of developing goals is to understand the departments in your organization. Rather than building plans around job titles and specific people as is usually the case with traditional approaches, Results Now asks that you build the Operating Plan goals around departments that must exist for the organization to be successful, even if these departments do not have staff members or volunteers assigned to them.

Consequently, job titles and department boundaries have less meaning because people have job duties that often cross departments. Since most nonprofit organizations are lean in terms of hierarchy, it is common for people to do many different jobs. The finance person does the budgets and answers the phones; the executive director handles governance, fundraising, programming, and takes out the trash.

In many nonprofits, it is unlikely that there will be a fulltime development director on staff, but someone somewhere must still do fundraising whether the board member, board committee, the executive director, or an independent contractor does it. By making sure that there is a development department, it is much more likely that important matters related to fundraising will be remembered. Whether the people who work in the department area are staff, board members, or volunteers, having the department identified makes it more likely that goals will be developed that can move the area ahead. Figure 9.1 is a simple department map for a Big Brothers – Big Sisters.

Figure 9.1 Big Brothers – Big Sisters Department Map

|Board |

| | |

|Executive Director |

| | |

| | | | | | | | |

|Administration |Marketing |Development |Programs |

| | | | | |

| | | | | | | | |

| | | |High School Mentoring |Core Match |Recruiting |

Figure 9.2 is a department map from a county children services agency with a budget in excess of $50 million.

Figure 9.2 Children Services Department Map

|Board of Directors |

| | |

| | | | | | |

|Planning & Programs Committee | | |Resources Committee |

|Executive Director |

| | |

| | | | | | |

The noticeable question here is whether these examples are too simple. Remember that the department map is a tool for determining the necessary departments of the organization that will guide the setting of goals. You can discard it after use or hold onto it and put in information packets for the board. Either way, it should be kept as simple as possible, but not simpler.

Making 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?[cdxlvii]

These two questions represent goals and action steps respectively. Not all goals have action steps, but many do and most should.

Generate Your Ideas

There are a variety of ways to generate goals for a department. The first and best place to look for Operating Plan goals is the Strategic Plan in general and the success measures and vision strategies in particular. 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. Take for example this example shown in Table 9.1 from a performing arts center development department.

Table 9.1 Performing Arts Center Development Success Measures

|(in thosands) |Year 4 |Year 3 |Year 2 |Year 1 |This Year |

|Bigs – Inquiries |352 |319 |610 |400 |400 |

|Applications Completed |120 |176 |229 |200 |200 |

|Little Sisters: Inquiries |54 |33 |50 |75 |100 |

|Applications Completed |33 |42 |42 |60 |85 |

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, for example.

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 one, you may need to enhance the infrastructure in the development department or make your first hire of an administrative assistant. In year two, 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 especially useful for departments that have difficulty finding possibilities in the success measures and vision strategies. You may have already generated a list when you were working on the vision. As you may recall, 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.

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 was just one thing I could fix that would make things work a lot better, it would be.” Once done, grouping the answers into 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 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 Vision Strategies 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.[cdxlix] 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.[cdl]

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.”[cdli] Difficulty means that the goal “should be challenging, but not impossible to achieve.”[cdlii] 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).[cdliii]

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.”[cdliv] 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.”[cdlv]

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 whether he or she “believes that the behavior will lead to outcomes . . . that these outcomes have positive value for him or her [and] he or she is able to perform at the desired level.[cdlvi] In other words, what’s in it for me, do I care about it, can I get it if I try? 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 pull everything together for a success is to involve the goal taker in the process because “positive goal acceptance is more likely if employees participate in setting goals.”[cdlvii] Provided that the goals we set are “within our grasp, but outside our reach,” and there is the presence of positive incentives along with genuine acceptance developed through a participatory process, better performance will likely result.

Naturally, 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, by and large, when there is time to set goals with those who will be accountable for achieving them, take the time. 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.”[cdlviii]

My approach to a properly formatted goal is to be sure it contains a verb, 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:

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 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 11 Budget

You spend as little as you can,

you earn as much as you can.[cdlix]

Colin Blumenau

There is great variety in the formats used for the budget and there is no right or wrong one to use except for one: a budget summary should not be longer than one or two pages, three 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 questions:

1. What has been spent so far this fiscal year?

2. What is the approved budget for the current fiscal year?

3. What is the projection for how the current fiscal year will end?

4. What 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 sought-after 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 has arisen primarily because publicly held corporations use quarter-to-quarter 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 10.1 is an example.

Table 10.1 Common Budget Format

| |Last Year |Budget |$ Difference Column|This Year |% Difference |

| |Yr To Date 5/31 |Yr To Date 5/31 |1 less Column 2 |Yr To Date 5/31 |Column 4 ÷ |

| | | | | |Column 2 |

|Total Income |224,531 |285,787 |60,746 |284,082 |(0.6) |

|Total Expense |200,490 |248,909 |48,419 |316,510 |127 |

|Net Income |24,041 |36,878 |12,327 |-32,428 |(88) |

We know very little about what is going on in the above organization beyond year-to-date comparisons. More important, the reader cannot get a clear picture of the anticipated surplus or deficit that will occur at the end of the fiscal year. Table 10.2 shows the earned income section of a typical nonprofit that shows the four-column format in action.

Table 10.2 Better Budget Format

|(in Thousands) |Actual |Budget |Forecast |Difference |

| |Yr To Date |For Yr Ending |For Yr Ending |Column 3 less |

| |6/30 |12/30 |6/30 |Column 2 |

|PROFIT AND LOSS | | | | |

|REVENUE | | | | |

|Contributed |696 |1,891 |2,420 |529 |

|Earned |805 |1,113 |947 |(166) |

|REVENUE |1,501 |3,005 |3,367 |362 |

|EXPENSES | | | | |

|Program Services |1,221 |1,462 |1,265 |(197) |

|Management and General |160 |200 |141 |(59) |

|Fundraising |224 |217 | 514 | |

| EXPENSES |1,605 |1,879 |1,920 |41 |

|EXCESS OR (DEFICIT) |(104) |1,126 |1,447 |321 |

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 column.

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 have become increasingly complex and 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 budget summary.

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. Most people who ask for a balance sheet are actually looking for answers about cash flow or solvency questions. You approximate this quite simply using the suggested format with some modifications as shown in the example in Table 10.3.

Table 10.3 Budget Format with Cash Reconciliation

|(in thousands) |Actual |Budget |Forecast |Difference |

| |Yr To Date |For Yr Ending |For Yr Ending |Column 3 less |

| |5/31 |6/30 |6/30 |Column 2 |

|Total Revenue |186,449 |300,000 |320,000 |20,000 |

|Total Expenses |200,490 |250,000 |290,000 |40,000 |

|Net Income |(14,041) |50,000 |30,000 |(20,000) |

|Add Back Depreciation |16,000 |32,000 |31,000 |(1,000) |

|Approximate Cash Position |1,959 |82,000 |61,000 |(21,000) |

Granted, for many nonprofits and especially those that don’t own real estate, depreciation is a negligible expense. As such, their net income is often essentially the same as their cash position. The challenge that this example presents is that the organization has a surplus on a cash basis and a deficit on an accrual basis in the actual year to date column. Such is the stuff of discussion about the value of depreciation and the like, which can occasionally enliven a discussion or present an opportunity for education to those unfamiliar with such financial matters.

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 10.4.

TABLE 10.4 Abbreviated 990-Based Budget Format

|(in Thousands) |Actual |Budget |Forecast |Difference |

| |Yr To Date |For Yr Ending |For Yr Ending |Column 3 less |

| |6/30 |12/30 |6/30 |Column 2 |

|PROFIT AND LOSS | | | | |

|REVENUE | | | | |

|Contributed |696 |1,891 |2,420 |529 |

|Earned |805 |1,113 |947 |(166) |

|REVENUE |1,501 |3,005 |3,367 |362 |

|EXPENSES | | | | |

|Program Services |1,221 |1,462 |1,265 |(197) |

|Management and General |160 |200 |141 |(59) |

|Fundraising |224 |217 | 514 | |

| EXPENSES |1,605 |1,879 |1,920 |41 |

|EXCESS OR (DEFICIT) |(104) |1,126 |1,447 |321 |

|BALANCE SHEET | | | | |

|ASSETS | | | | |

|Current |373 |1,210 |1,264 |54 |

|Long-term |3,413 |3,974 |5,586 |1,612 |

|ASSETS |3,786 |5,184 |6,850 |1,666 |

|LIABILITIES | | | | |

|Current |220 |202 |316 |114 |

|Long-term |5 |19 |35 |16 |

|LIABILITIES |225 |221 |351 |130 |

|NET ASSETS | | | | |

|Unrestricted |3,396 |3,698 |3,748 |50 |

|Temporarily restricted |165 |1,265 |2,624 |1,359 |

|Permanently restricted |  |  |128 |128 |

|NET ASSETS |3,560 |4,963 |6,499 |1,536 |

|LIABILITIES & NET ASSETS |3,786 |5,184 |6,850 |1,666 |

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.[cdlx] Neglect the financials at your peril.

Part V: Governance Plan

When it comes to governance, everyone is an expert.

- John C. Whitehead[cdlxi]

|STRATEGIC PLAN |OPERATING PLAN |

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

|Lines of Business |goals |

|success measures |Budget |

|vision | |

|Delegation |Accountability |

|Who does what? |When did it happen? |

|Duties |Agendas |

|Guidelines |Assessments |

|GOVERNANCE PLAN |

Somewhere 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 that 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 for why executive directors would leave their jobs behind burnout and career opportunity.[cdlxii] 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 a relative rare and unnatural act.”[cdlxiii] 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 the board and troubled board have become almost interchangeable.”[cdlxiv]

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.”[cdlxv] And when his new edition was released a few years ago, not a word of this statement had changed.[cdlxvi]

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.”[cdlxvii]

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.”[cdlxviii] 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.”[cdlxix] 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 more than 2,150 chief executives and board members who were selected from its own membership?

Understanding what’s wrong with 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.”[cdlxx] 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.[cdlxxi]

After reading this, how can anyone be surprised that many board members “find serving on boards to be an exercise in irrelevance”?[cdlxxii] 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.”[cdlxxiii] So long as we arrive safely, do we really care what the pilot does at 30,000 feet with the auto pilot 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 what destination and the executive director 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 executive gets off easy. 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.”[cdlxxiv] 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 fundraising. What executive director hasn’t complained about ineffectiveness on the part of the board in fundraising 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 fundraising their lowest grades on the board performance report card.[cdlxxv]

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. Longer-tenured 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.”[cdlxxvi] 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.”[cdlxxvii]

Though we know that “nonprofit organizational effectiveness is strongly related to board effectiveness,”[cdlxxviii] we also know that “many boards do not fully meet their governance and management responsibilities.”[cdlxxix] Indeed, as William Bowen observes, “Boards can also matter greatly as negative forces when they act imprudently.”[cdlxxx]

The simple truth is that most people want nonprofit boards to be effective, to be responsible, 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 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 nonprofit 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.[cdlxxxi] The average board member, however, will not make all of the meetings as evidenced by the average attendance rate of 71 percent. [cdlxxxii] 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”[cdlxxxiii] and this portrayal is as fresh today as when it was written nearly 25 years ago. Here’s how it works:

▪ 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.[cdlxxxiv]

Third, in the world of nonprofit governance, size does matter. At an average size of 16,[cdlxxxv] 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’s common sense that a larger group will have difficulty working together than a smaller group. Larger boards have 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 difference toward a common plan and hold themselves accountable for the results.”[cdlxxxvi]

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 G’s” (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 along side of the volunteer influencers who don’t have two dimes to rub together. Board members that 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.[cdlxxxvii] 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 could produce meaningful results if they were absent almost three days out of 10 days as are 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? 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 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.[cdlxxxviii] 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.[cdlxxxix] And despite the common understanding that funders frown upon anything less than 100 percent board giving, less than half of executive directors report meeting this standard.

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,”[cdxc] but maybe she should change that “some” to “most” based upon 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.[cdxci] It’s “déjà 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 director 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.[cdxcii] 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 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.[cdxciii] Making matters worse is that the average tenure of the officers is less than two years.[cdxciv]

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 that 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 seven out of 10 board members on average are absent means that just four people can change the direction of the organization. You get the point. And considering that only two in ten board members has a 90 percent or better attendance record,[cdxcv] 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.[cdxcvi] These are "once is enough" leaders; five out six take an immediate vacation after leaving and only one out of three ever goes on to take another top job with a nonprofit.[cdxcvii] It’s the blind leading the blind in many nonprofits.

Helping to explain this “get me out of here” situation is that about 82 percent of nonprofits have budgets of less than $1 million,[cdxcviii] nearly 30 percent have one or no full-time employees, half have five or fewer, and almost 90 percent have 50 or fewer.[cdxcix] 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.[d] What does this add up to? Put simply, “many nonprofit leaders are ‘learning by doing.”[di] 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 for-profit 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.”[dii]

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.”[diii] 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.[div]

Second, you can land a top job young. It might not be a big nonprofit, but it’s a company none the less. 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 are small; 45 percent operate on expense budgets of less than $100,000.[dv] 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 upon each member’s affluence or influence. Hoping that this will somehow lead to a fund raising 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 tradeoffs 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 upon 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 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 towards 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.”[dvi]

No board should be without this sort of helpful advice provided, of course, that everyone knows what the organization is supposed to do 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? [dvii]

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.”[dviii]

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 12 Delegation

Same bed, different dreams.

Chinese Proverb

There’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.”[dix]

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.”[dx] 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.”[dxi]

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 for 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 you job” Tidwell and the executive director plays Jerry “Help me 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.[dxii] The best executive directors understand that it is their central responsibility to help the board help them, not the other way around.

Low Hanging Fruit

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.”[dxiii]

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.”[dxiv] 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 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.[dxv]

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.”[dxvi] 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 your boss really your best friend when he or she has the power to terminate your employment?

The problem with being a board member in chambers, 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.

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:

1. Understanding organization’s mission

2. Financial oversight

3. Legal and ethical oversight

4. Knowledge of organization’s programs

5. Providing guidance and support to CEO

6. Level of commitment and involvement

7. Evaluating the CEO

8. Strategic planning

9. Monitoring organizational performance

10. Understanding board’s roles and responsibilities

11. Recruiting and orienting new board members

12. Community relations and outreach

13. Fundraising[dxvii]

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. Board jobs are flat-out different than board member jobs.

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.”[dxviii]

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 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.[dxix]

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 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 interest in this? An organization with short staff tenures is going to have difficulty accomplishing its goals and thus merits the 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.

Levers

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.[dxx] 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:

1. A clear, elevating goal

2. Results-driven structure

3. Competent team members

4. Unified commitment

5. Collaborative climate

6. Standards of excellence

7. External support and recognition

8. Principled leadership[dxxi]

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. |2.8 |3.0 |

|2. We view our mission and goals as important or worthwhile. |3.3 |3.4 |

| |3.4 |3.2 |

|A Results Driven Structure | | |

|3. We have clear roles and accountabilities. |2.4 |2.3 |

|4. We have an effective communication system where credible information is easily accessible to all |2.5 |2.7 |

|team members. | | |

|5. We have an effective communication system where opportunities exist for team members to raise |2.6 |2.8 |

|issues not on the formal agenda. | | |

|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. |1.9 |2.1 |

|8. We make decisions based on sound facts and interpreted without the harness of predisposition. |2.7 |2.5 |

| |2.8 |2.5 |

|Competent Team Members | | |

|9. We possess the relevant skills, abilities, and knowledge. |2.9 |2.9 |

|10. We possess a strong desire to make a meaningful difference to the cause. |3.3 |3.2 |

|11. We are capable of working well with each other. |3.1 |3.1 |

| |3.4 |3.1 |

|Unified Commitment | | |

|12. We make serious individual investments of time and energy. |2.6 |2.6 |

|13. We do not pursue individual objectives at the expense of the cause. |3.1 |3.1 |

| |3.3 |2.9 |

|A Collaborative Climate | | |

|14. We have a climate of honesty – integrity, no lies, and no exaggerations. |3.3 |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 |

| |3.2 |3.1 |

|Standards of Excellence | | |

|18. Our standards of performance are clearly and concretely articulated. |2.3 |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. |2.3 |2.4 |

| |2.7 |2.4 |

|External Support and Recognition | | |

|21. We celebrate our successes. |2.9 |2.8 |

|Principled Leadership | | |

|22. Our officers keep the vision of the future alive and in mind. |2.7 |2.9 |

|23. Our officers inspire us to make changes when needed. |2.6 |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. |3.0 |2.9 |

| |3.0 |2.7 |

| Average |67.9 |69.7 |

| Median |67.0 |70.0 |

|68% of the scores fall in this range |57-79 |57-83 |

By rank ordering the eight topics, you can see where boards are best and most in need of attention as shown in Table 12.2.

Table 12.2 Board Performance Questionnaire Rankings

| |Boards |Attendees | |

|A Clear, Elevating Goal |3.4 |3.2 |A Clear, Elevating Goal |

|Competent Team Members |3.4 |3.1 |Competent Team Members |

|Unified Commitment |3.3 |3.1 |A Collaborative Climate |

|A Collaborative Climate |3.2 |2.9 |Unified Commitment |

|Principled Leadership |3.0 |2.8 |External Support and Recognition |

|External Support and Recognition |2.9 |2.7 |Principled Leadership |

|A Results Driven Structure |2.8 |2.5 |A Results Driven Structure |

|Standards of Excellence |2.7 |2.4 |Standards of Excellence |

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 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 was 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)

Again, 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 first 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.”[dxxii] In the delegation section of the Governance Plan, clear roles and accountabilities are addressed by the duties.

The critical first 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 standards being met.”[dxxiii] 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.”[dxxiv] 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.[dxxv]

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 that the board intends to hold itself accountable should belong to the board.

Like other Results Now elements, the answers will depend upon 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 arisen especially with regard to the 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 of duties as did an agency supporting families of hospitalized children as shown in Table 12.3.

Table 12.3 Board Duties

|Ideas |Results |

|- evaluate/change mission |1. Decide why |

|- ask good questions, direction, serve the community, establish |2. Decide where to go tomorrow |

|policies, growth, ascertain community needs and how to meet them, | |

|resolve growth questions, test assumptions, future planning, detective| |

|work | |

| |3. Delegate who does what |

|- hire/fire CEO, delegate, oversee the executive director, governance,|a. Board (board, committees, officers) |

|time contribution, obtain information/knowledge/learn, education, hold|b. Board members |

|each other accountable, job of the board, serve each other, recruit, |c. Executive Director |

|by-laws update | |

|- oversee money, operations, financial responsibilities, budget, avoid|4. Determine if it happened |

|mission creep, stay on mission | |

There are boards that will add other duties to the list including fundraising 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 fundraising, it should exclude it from the executive director’s roster of duties. But if at the same the board intends to hold the executive director accountable for the bottom line including fundraising results, the authority for fundraising is the executive director’s.

Testing the four board duties against the responsibilities of nonprofit governance provided by BoardSource lends support to their validity as shown in Table 12.4. [dxxvi]

Table 12.4 BoardSource and Results Now

|BoardSource |Results Now |

|1. Determine the Organization’s mission and Purpose |1. Decide why |

|11. Determine the Organization’s Programs and Services |2. Decide where to go tomorrow |

|2. Select the Chief Executive |3. Delegate who does what |

|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. Determine if happened |

|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 | |

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.”[dxxvii] 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.”[dxxviii] 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 be effective with any 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 to 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 upon 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 by-laws, 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 spread the work around effectively and give everyone something to do.

What kind of damage do poorly designed committees do beyond the obvious waste of resources including time and opportunity cost of that time? First, because the duties of the board are frequently ill-defined and confusing, committees are typically designed to mirror of 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 or 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. It is the executive director who is responsible to the board, but three out of 10 boards have marketing committees.[dxxix] 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.[dxxx] Just who 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 defacto popularity while enduring rhetorical derision.”[dxxxi]

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.

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 told her to do. 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, triple the average hourly income for a full-time employee in America.[dxxxii]

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 by-laws 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 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 above. The duties to decide why and decide where to go tomorrow could foster a committee to develop the Results Now Master Plan. But this is not a good idea. 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.[dxxxiii]

The duty to determine when it happened could lead to a finance committee or performance assurance committee, finance 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,[dxxxiv] evaluation committees – like planning or strategy committees – may rob board members of the opportunity to become more knowledgeable. 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[dxxxv] and it is often chaired by board member next in line to become the chair.

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 at four out of five boards.[dxxxvi] 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.[dxxxvii]

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.[dxxxviii]

Whether or not 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 or not 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:

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.

Overstepping committee authority: The executive committee has extended beyond its stated authority without consulting the full board or gaining board approval.

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.[dxxxix]

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 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 should be notified and involved? In this day and age of smart phones 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”?[dxl]

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 and 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 fundraising 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 fundraising 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 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 full board about the executive committee is useful primarily to establish the limits of its authority. Table 12.5 shows the results from such a discussion at a fair housing agency.

Table 12.5 Executive Committee Duties

|Ideas |Results |

|- okay lawsuits, handle some emergencies, handle the minutia |1. Act for the board in between meetings with regard to non-material |

| |issues or in the event of an emergency when the board cannot be |

| |reasonably convened. |

|- review CEO |2. Coordinate the full board’s review of the compensation and |

| |performance for the staff in general and the chief executive in |

| |particular. |

|- more current source |3. Serve as a sounding board for the chief executive |

|- agenda for board, ensure planning |4. Focus the board’s work |

|- leadership, inform board |5. Coordinate the work of the full board[dxli] |

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 duties for the finance and governance committees, which are the second and third most popular committees:[dxlii]

Finance Committee

▪ Coordinate the board's oversight responsibilities including finance, legal, and ethics

▪ Recommend policies to the board, interpret them for the staff, and monitor their implementation

▪ Monitor the organization's financial records, review and oversee the creating of accurate, timely, and meaningful financial statements to be presented to the board

▪ Review the annual budget including operating and capital, recommend it to the full board for approval, and monitor its implementation

▪ Monitor compliance with federal, state, and other reporting requirements including oversight of the organization's financial audit

Governance Committee

▪ Assure board effectiveness, maximum participation and performance

▪ Recommend new trustees in a timely fashion

▪ Ensure board policies are being observed

▪ Implement board development and growth opportunities throughout the year

▪ Ensure all board members receive orientation

▪ Annually recommend a slate of officers to the board of trustees for approval

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 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.[dxliii]

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 say lay out six major responsibilities:

1. Keep the Purpose, goals and approach relevant and meaningful.

2. Build commitment and confidence.

3. Strengthen the mix and level of skills.

4. Manage relationships with outsiders, including removing obstacles.

5. Create opportunities for others.

6. Do real work.[dxliv]

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.[dxlv]

The average term of service for a board chair is 1.8 years and the number of consecutive terms is about two.[dxlvi] 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.[dxlvii]

The right chair can bring out the best in 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.”[dxlviii]

Board Member Duties

When asked about duties of the 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.[dxlix]

The path to a great board follows that of the outstanding team. The prescription is uncomplicated according to Frank Larson and Carl LaFasto:

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.[dl]

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 best-selling 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 idea hiring method; even the best executives make hiring mistakes . . . it makes selection all the more vital.[dli]

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.”[dlii] So how can we honor Jim Collins’ 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.”[dliii]

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, the construction process is uncomplicated. Table 12.6 lists the duties for board members at an agency that serves the families of children who are hospitalized.

Table 12.6 Board Member Duties

|Ideas |Results |

| |1. Exercise the duty of care[dliv] |

|- familiarize yourself with by-laws, know the mission, do your |a. Prepare |

|homework, be prepared |b. Attend |

|- attend 75% of full board meetings |c. Participate actively |

|- offer solutions, participate |d. Ask hard questions |

|- ask hard questions, have courage |e. Vote conscientiously |

|- don’t be afraid to vote | |

|- be a willing participant, serve on committees, participate in |2. Do the work of the board including serving on committees and |

|projects |attending events |

|- be an ambassador, protect the brand, involve outside organizations, |3. Champion the organization to and from the community |

|promote | |

| |4. Contribute generously |

|- financial support |a. Make a generous personal contribution |

|- go on calls |b. Actively participate in fundraising |

|- offer your expertise, give wise counsel |c. Share your expertise |

|- trust each other, motivate each other, get to know each other |5. Support each other |

|- hold each other accountable |6. Hold each other accountable |

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 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 or 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 of what gets today? As is the case with many of the issues that come up in Results Now, the answer is “It depends.” Some boards with an early-career 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:

Table 12.7 Executive Director Duties

|Ideas |Results |

|- implement objectives, right staff, hire/fire, say “no” when |1. Deliver what gets done today |

|necessary, secure funding, research other programs, guide operations, | |

|manage staff, presence in the community, provide leadership, | |

|spokesperson, fiduciary, scan environment, evaluate staff |2. Enable the board |

|- inform the board, challenge board, don’t let the board micromanage | |

What does it mean to enable the board? The official dictionary definition of this verb applies, “1. to make able; give power, means, competence, or ability to; authorize . . . 2. to make possible or easy . . . 3. to make ready; equip.”[dlv] Some observers say that it is the job of the board to help itself.[dlvi] 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.”[dlvii] 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.”[dlviii]

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.[dlix]

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. Again another long pause. And then he said that I only had myself to blame if I was disappointed that hadn’t read it 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 me. 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 board-centered 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.[dlx]

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.”[dlxi]

Guidelines

Guidelines differ from agency to agency depending upon many factors. As Jim Collins and Jerry Porras observe in their best-selling 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.”[dlxii] 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.”[dlxiii] Thus, unlike values that 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 officers and as illustrated in Table 12.8 by this set from a suicide prevention center.

Table 12.8 Board Guidelines

|Ideas |Results |

|- do important work, support mission, be productive, on subject, stay |1. Focus talent and time on important work |

|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|2. Be a give-and-take board that respects the diversity and strength |

|reports, board participation, interactive, review status, respect each|of all its members |

|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, |3. Govern the organization – not manage it |

|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 | |

Table 12.9 is a different and larger group of guidelines from an agency that helps the families of sick children:

Table 12.9 More Nuanced Board Guidelines

|Ideas |Results |

|- fun, know board members, celebrate! |1. Enjoyable and sociable |

|- effective time, less reports, if you can write it/no need to speak |2. Focused and efficient |

|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, |3. Give-and-take, not show-and-tell |

|participation, brain storming | |

|- issue focused, mission focused, call the question, action oriented, |4. Important work |

|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 |5. Information counts |

|- informative, review important information, hearing more about the |6. Informative and educational |

|families, educational, summary of committee meetings, grant | |

|involvement, what’s staff doing, review mission | |

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.

Table 12.10 Board Member Guidelines

|Ideas |Results |

| |1. Exercise the duty of loyalty[dlxiv] |

|- conflict of interest, integrity, ethical behavior |a. Disclose any potential conflicts of interest |

|- support the voice of the board, no parking lot chatter, support |b. Speak with one voice including majority decisions not personally |

|decisions |supported |

|- put house first, meet/exceed loyalty |2. Exercise the duty of obedience[dlxv] |

|- keep confidences |a. Stay true to the mission |

|- listen, concise, don’t dominate others, inclusive, think critically,|b. Keep confidences |

|be willing to learn, respect opposing viewpoints, open, honest, pull |c. Respect each other |

|out ideas from each other, mentor members | |

|- set an example, friendly, professional attitude, do it, deliver, do |d. Follow through |

|what you say you’ll do, accountable | |

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 that 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.”

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.[dlxvi]

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 alright 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.”[dlxvii]

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 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. A basic tenet of communication theory states that a network’s potential benefits grow exponentially as the nodes it can successfully interconnect expand numerically. It is not difficult to see how this growth occurs. If two people exchange knowledge with each other, both gain information and experience linear growth. But if both then share their new knowledge with others – each of whom feeds back questions, amplifications, and modifications – the benefits become exponential.[dlxviii]

What experienced board members sometimes forget is that every time someone new joins the board, the board team in essence has been re-formed. 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.

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 to 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 – 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.”[dlxix]

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 pre-approve 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 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 fundraising 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 |1. The executive director will conduct himself or herself with the |

|money, be legal, don’t lose sight of strategic plan, duty of loyalty, |highest business and professional guidelines at all times, never |

|report status versus goals, don’t talk with other agencies for merger |causing or allowing any practice that is illegal or unethical. |

|without talking to board first | |

| |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. |

|- development, AFP, compliance with national and United Way |3. With regard to development, the executive director will follow the |

| |standards set by the Association of Fundraising Professions. |

|- mismanage endowment funds |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. |

|- 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, turn-over, poor morale, |6. With regard to personnel matters, the executive director will: |

|poor pay, poor management, complacency, burn out |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. |

|- no surprises, staff changes, serious allegations about clients, keep|7. With regard to communication to the board, the executive director |

|board up to date, don’t manipulate board, don’t let board waste |will: |

|executive director’s time |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. |

|- Positive margin from operations without investment income, live |8. With regard to financial matters, the executive director will: |

|within budget, financially prudent, clean audit, deal with management |a. Make no capital acquisition of greater than $10,000. |

|letter, stay on top of budget, lend money, don’t invade endowment |b. Draw no more than five-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 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 categories[dlxx]

▪ Mission and Program

▪ Governing Body

▪ Conflict of Interest

▪ Human Resources

▪ Financial and Legal

▪ Public Accountability

▪ Fundraising

▪ Public Affairs and Public Policy

▪ BBB – 20 standards in four categories[dlxxi]

▪ Governance and Oversight

▪ Measuring Effectiveness

▪ 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 13 Accountability

What gets measured gets done.

-Maison Haire

It 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 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 a new group 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 especially the vertical ballet, which focused the day. Instead of the 5,000 to 10,000 people who could have been accommodated at the start of the afternoon, the number of people actually freezing to death in line was later 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 of the theatre. What if there were a fire and people had to get out fast? Now imagine if you can the huge and unexpected crowd with looks of claustrophobic fear in their eyes and bodies pressed against the thin glass walls of the empty – and deliciously warm – wintergarden.

Memory is frail and I’m sure I exaggerate my recollections, 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, I was the only one left standing as the walls began to bow inward from the pressure of all those people. I was a deer in the headlights; hell had truly frozen over.

When the press converged in mass 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 me. 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 a succinct 565 words including the headline “Schuster Flubbed Open House.” What follows is just a taste:

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. “My pledge is to make the customer the star, and I did not fulfill that promise on Sunday,” Mark Light acknowledged Tuesday . . . “I hope the community will forgive me for the difficulties they experienced on Sunday, and come down and enjoy this blessing.”[dlxxii]

By the time the doors closed that night, thousands and 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.”[dlxxiii] 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 responsibility. Accountability wasn’t just about me; it was about those who were accountable to me. Had I carefully reviewed the plans as they were developed, I could have asked hard questions that might have uncovered the flaws that led to hell freezing over. And 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.”[dlxxiv] Put simply, accountability “essentially means being required to answer, to take responsibility, for one’s actions.”[dlxxv]

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.”[dlxxvi]

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 are we going 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.

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:

Table 13.1 Basic Annual Agenda

|Who-When-Where |What |

|Full Board – January 24th 3:30-7:00 Main |Last year’s Results Now Master Plan review |

|Hall | |

|Full Board – March 28th |TBA |

|3:30-5:00 Main Hall | |

|Full Board – April 26th |Quarterly Financials / This year’s Results Now Master Plan review / Volunteer Recognition Dinner |

|4:30-7:30 Community College | |

|Full Board – May 18th |Grant Site Visit / Fish Fry |

|3:00 – 7:00 | |

|Full Board – July 25th |Quarterly Financials / This year’s Results Now Master Plan review |

|3:30 – 5:00 Main Hall | |

|Full Board – August – 17th or 24th TBD |Donor Recognition and Future Fund Event |

|Full board – September 26th 3:30 – 6:00 |Next year’s Results Now Master Plan discussion |

|Main Hall | |

|Full board – November |Annual Meeting – Officer Elections / Year End Projections / Budget Presentation / Results Now Master|

|3:30 – 6:00 Main Hall |Plan Presentation and approval |

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 in a year that used its annual agenda as meeting central.

Table 13.2 Comprehensive Annual Agenda

|Who-When-Where |What |

|Executive Committee |Executive Director’s individual plan |

|Full Board – February |Last-year Strategic Plan results |

|8:30 AM-11 AM |Current-year Strategic Plan review |

|Board Room | |

|Full Board – May |Field trip to study service delivery through hands-on shadowing |

|8:30 AM-11 AM | |

|Board Room | |

|Executive Committee |Delegation section – Executive Director’s duties |

| |Executive Director’s individual plan |

| |Executive Director’s compensation |

|Governance Committee |Delegation section – Board duties and guidelines |

| |New-year directors and officer slate |

|Assurance Committee |Delegation section – Executive Director’s guidelines |

| |Last-year Leadership section – audit review |

|Full Board – July |Current-year Strategic Plan review |

|8:30 AM-11 AM |Strategic Plan first draft |

|Board Room | |

|Executive Committee |Executive Director’s individual plan |

| |New-year Executive Committee goals |

|Governance Committee |Delegation section – Board duties and guidelines |

| |New-year directors and officer slate |

| |New-year Governance Committee goals |

|Assurance Committee |Delegation section – Executive Director’s guidelines |

| |Last-year Leadership section – audit review |

| |New-year Assurance Committee goals |

|Full Board – September |Current-year Strategic Plan review |

|10:30 AM-1 PM |Operating Plan and Governance Plan first draft |

|Board Room | |

|Full board – November |Results Now Master Plan first draft |

|8:30 AM-11 AM | |

|Board Room | |

|Executive Committee |Executive Director’s individual plan |

|Full board – December |Results Now Master Plan final draft |

|4:30 PM-9 PM |Annual meeting |

|Board Room |Celebration Dinner |

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 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 upon 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.[dlxxvii]

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 |Convener |Minutes |

|1. Call to Order |Chair |5 |

|a. Minutes of Last Meeting | | |

|b. Consent Agenda | | |

|2. Accountability | | |

|a. Financials |Treasurer |10 |

|b. Executive Summary |Executive Director |10 |

|c. Board Assessment |TBA |10 |

|3. Central Meeting Content |TBA |60 |

|4. No surprises |Executive Director |5 |

|5. Chair’s Comments |Chair |5 |

|6. Open discussion |Chair |10 |

|7. Board Meeting Assessment |Chair |5 |

|8. Adjournment |Chair | |

| | |120 |

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 the full board did today to accomplish its duties (4=best) |

| Decide why and where to go tomorrow |1 |2 |3 |4 |

| Determine when it happened |1 |2 |3 |4 |

| Delegate who does what (duties and guidelines) |1 |2 |3 |4 |

|Board Guidelines: Circle how the full board did today to respect its guidelines (4=best) |

| The board focused its talent and time on important work |1 |2 |3 |4 |

|The board was a give-and-take board that respected the diversity and strength of all its |1 |2 |3 |4 |

|members | | | | |

| The board governed the organization – not managed it |1 |2 |3 |4 |

|Comments: |

|What should we discuss at upcoming meetings? |What did you like about the meeting? |What did you not like about this meeting? |

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 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 you can cut the duties, but always leave the guidelines and the comments. Both 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 12.5 are two very different sets of comments.

Table 13.5 Board Comments from a Retreat

|What should we discuss at upcoming meetings? |What did you like about this meeting? |What did you not like about this meeting? |

|Strategy |Give-and-take atmosphere |- Concern about saying things that funders on |

|- Where our focus should be as we move forward |- Open discussion |board might not like to hear |

|to beef up or expand services |- Hearing voice I did not know | |

|- Strategy and direction |- Hearing all voices | |

|- Funding diversification |- Everyone’s participation (for those who | |

| |attended) | |

| |- Open and candid discussions | |

|Governance |Building community | |

|- Attendance standards |- It gave us an opportunity to bond as a board | |

|- Brief discussion on results of where we are |Clarifications | |

|- Continue the open dialogue |- Resolved issue that I had | |

| |- Clarified roles and responsibilities | |

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 13.6 Board Comments from a Regular Meeting

|What should we discuss at upcoming meetings? |What did you like about this meeting? |What did you not like about this meeting? |

|Strategy |Give and take |- Leadership |

|- Ongoing changes in vision and mission with |- Active discussion on bylaw revisions |- President not there, it was a crucial |

|emphasis on specific direction |- Differences of opinion and points of view |meeting, crucial votes |

|- 2008, future |- Good dialogue |Transparency issues |

|- Strategies for the future |- Sharing, openness, genuine caring, differing |- Personal agendas |

|- How do we compare to other nonprofits |opinions surfaced |- This was the annual meeting. Important |

|Operations |- Honest discussion |changes were being proposed by the governance |

|- How we are impacting those we serve (mission |- Good discussion |committee. There was no prior discussion on any|

|Moment) |Focus |of the proposed changes, yet committee met all |

|- How others (the public) might view that our |- How our executive director was so on top of |summer. Conflict of interest was present on |

|organization is so sound when we are asking for|everything. I think she gave the lengthy |governance committee. Outcome remained |

|funding. |meeting energy. |contentious. |

|- Always finances | | |

|Delegation |Information counts |Use of time |

|- Role of the officers and role of each |- mission Moment |- Length |

|committee – with membership designation for |- Informative |- I understand why the meeting was lengthy, but|

|each committee |- Lots of info |I like the fact our regular meetings are 1.5 |

|Governance | |hours. |

|- Recap the last meeting, as not all were in | |- The meeting when went overtime (too much |

|attendance . . . it was an important meeting | |agenda or spent too much time on bylaws) |

|- Brief report / update from each committee – | |- Less reports – we can read these |

|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) | | |

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.

Table 13.7 Board Member Assessment

|Board Member Duties: Circle how you have done recently to accomplish your duties (4=best) |

|I prepared. |1 |2 |3 |4 |

|I attended. |1 |2 |3 |4 |

|I participated actively. |1 |2 |3 |4 |

|I asked hard questions. |1 |2 |3 |4 |

|I voted conscientiously. |1 |2 |3 |4 |

|I did the work of the board including serving on committees and attending events. |1 |2 |3 |4 |

|I championed the organization to and from the community. |1 |2 |3 |4 |

|I made a generous personal contribution. |1 |2 |3 |4 |

|I actively participated in fundraising. |1 |2 |3 |4 |

|I shared my expertise. |1 |2 |3 |4 |

|I supported my fellow board members. |1 |2 |3 |4 |

|I held my fellow board members accountable. |1 |2 |3 |4 |

|Board Member Guidelines: Circle how you have done recently to respect your guidelines (4=best) |

|I disclosed any potential conflicts of interest |1 |2 |3 |4 |

|I spoke with one voice including majority decisions not personally supported |1 |2 |3 |4 |

|I stayed true to the mission |1 |2 |3 |4 |

|I kept confidences |1 |2 |3 |4 |

|I respected my fellow board members |1 |2 |3 |4 |

|I followed through on my commitments |1 |2 |3 |4 |

|Comments: |

|What can be done to help you do your best as a |What do you like about being a board member? |What don’t you like about being a board member?|

|board member? | | |

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 the reason for asking the board member to self-assess is to keep the duties and guidelines fresh in their minds.

Because attendance is one of the – if not the most critical – measures of board member performance, an attendance assessment should be also used. Table 13.8 is one from an agency focused on the developmentally disabled.

Table 13.8 Board Member Attendance

|Board Member |Feb |Apr |Jun |Aug |Oct |

|1 |√ |√ |X |√ |√ |

|6 | | |X |X |√ |

|8 |√ |X |X |√ |√ |

|13 |√ |X |X |X |X |

|√ = Present, X = Absent |

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 no-shows? 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 that 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.

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 the guidelines are specific enough to require more than a cursory look. The solution is to include the duties and only those guidelines related to related to governance as was done in Table 13.9.

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 |1 |2 |3 |4 |

|Enable the board |1 |2 |3 |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 |1 |2 |3 |4 |

|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. |1 |2 |3 |4 |

|Help the board in its implementation of the Results Now Master Plan. |1 |2 |3 |4 |

|Not burden the board with insignificant issues that divert focus. |1 |2 |3 |4 |

|Inform the board if it is burdening the staff with insignificant issues that divert focus. |1 |2 |3 |4 |

|Foster a relationship with the board based upon trust and respect. |1 |2 |3 |4 |

|Comments: |

|What should our executive director discuss at |What do you like about the way our executive |What one thing would you change about the way |

|the next board meeting? |director works with the board and/or board |our executive director works with the board |

| |members? |and/or board members? |

Following are the comments from an organization that asked just the third question about what one thing the executive director should change:

Accountability

▪ To be more focused on the financial state of the organization

▪ Better accounting of $ and fund raisers

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

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 sugar coat, 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.

▪ 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 some issues to address 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 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.

Chapter 14 Smart Board

I always wanted to be somebody,

but I should have been more specific.

- Lily Tomlin

Many 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.”[?] 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,[?] the better 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.

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 anthem, “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 from them? 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 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.

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 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 nineties, “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-three 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 the core of the Strategic Plan. 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 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 a performing arts group:

Overview

The theme for the Results Now Master Plan the 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 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 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 its goals for attendance and gross sales. Some lines of business are struggling; however, increases in singles 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 standalone 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 of Child Care Clearinghouse. 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 contribution as a leader of our planned giving initiatives to build that 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 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. None-the-less, 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, eighty 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 Backmon 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.

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.[?]

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 and 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.”[?]

Board Members

Woody Allen once said, “Eighty percent of success is showing up.”[?] 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 fundraising 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 on 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 on-going activities to raise the necessary funds for operations is a critical need. Other executive directors remember those board members who asked tough questions are the some of the best at adding value. A single board who participates actively in decision-making can have an immense difference an organization. Take Child Care Clearinghouse for example.

Julie had always expressed concern to the executive director that she talked too much at board meetings. She had come on the board during a substantial period of 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 Bob, the executive director, reassured Julie that her voice was important and that he wished he had ten other board members that provided the stimulation in board meeting 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?

In strategic planning, Bob and the board did not directly identify any opportunities to be a better a community citizen. But because Julie had kept the issue in front of the board in a positive way, Bob was more open to the possibilities and the matter finally became a strategy to explore. The rest is history: The first opportunity for helping came to Bob when the board president of another, smaller agency with a similar mission asked for help. Ten months later, a new joint program between the two agencies was launched with an annual price tag of $1 million. This ushered in a new period of dynamic activity for the Clearinghouse that was a direct result of one board member asking tough questions over a period of years.

A single board member can make a difference. Bob recalls having a twenty-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, Bob will 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 as 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 gives 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.”[?] They should return the favor by being diligent in their 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 to 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.[?]

In other words, if the mission does resonate and 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”[?] as Marcus Buckingham and Curt Coffman like to say, 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 first hand 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, call them presidents, chief professional officers, or CEOs, 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 executive’s responsibility. We can no longer expect boards, in most cases, to improve their performance independently.[?]

What actions do executive directors take in the practice of board-centered leadership? There are just six:

1. Facilitating interaction in board relationships.

2. Showing consideration and respect toward board members.

3. Envisioning change and innovation for the organization with the board.

4. Providing useful and helpful information to the board.

5. Initiating and maintaining structure for the board.

6. Promoting board accomplishments and productivity.[?]

To be sure, not everyone believes that the executive director is at the center for 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.”[?]

Other see a clear risk in the having the executive director at the center of leadership. Richard Chait, William Ryan, and Barbara Taylor call this leadership as 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.”[?] 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.”[?] Their solution is the better-by-far alternative of what they call is Type III governance where “trustees and executives collaborate.”[?]

Ultimately, the question of who is responsible for effective governance is 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 a chance that he or she will turn the board in the “proverbial rubber stamp or a combination rubber stamp and cash cow.”[?] 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.”

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 the really want to build that institution into a dynamic factor in society, then they will soon discover that they can it so much more effectively if they have a dynamic , effective board.[?]

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 is largely responsible for the answer. In other words, if you don’t like your board, look in the mirror for the reason why.[?]

Appendixes

Appendix A—BAM

A brainstorming, affinity grouping, and multi-voting 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.[?]

The wonderful thing about BAM 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, 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 40-50 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. Phrase the issue under discussion in a full sentence

2. Brainstorm at least 20 ideas or issues

3. Without talking: sort ideas simultaneously into 5-10 related groupings

4. For each grouping, create summary or header cards using consensus.[?]

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 horse shoes 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 and that takes some practice.

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.

Table A.1 Affinity Grouping Ideas

|Ideas |Results |

|- contacts and resources, get money |Raise money |

|- advocate, be ambassadors, promote, good representatives |Champion the organization |

|- recruit others, sit on sub committees, do the work of the board | |

|- prepare, be educated, dedicated, ask questions, make good decisions,|Do the board’s work |

|attend, provide tech expertise, be active, participate, give money, | |

|attend events |Make good decisions |

The final step in the BAM process is multi-voting to prioritize or rate the final ideas. The easiest tool is weighted multi-voting that I like to call “Take 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.

Table A.2 Multi-voting Ideas

|Ideas |Results |

|- prepare, be educated, dedicated, ask questions, make good decisions,|Make good decisions (21) |

|attend, provide tech expertise, be active, participate, give money, | |

|attend events | |

|- contacts and resources, get money |Raise money (13) |

|- be ambassadors, promote, good representatives, advocate |Champion the organization (8) |

|- recruit others, sit on sub committees, do the work of the board | |

| |Do the board’s work (0) |

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. Multi-voting 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 multi-voting 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 four of lightweight aluminum telescoping display easels, four packages (three boards per package) of 30” x 40” foam boards, magic markers, a role of clear packing tape, and 10 packages of 5” x 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” x 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!

Appendix B — First Cut

First 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 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 a 1964[?] and later grouped into four categories of product, price, place, and promotion by Jerome McCarthy, which are commonly known today as the 4 P's of marketing.[?]

People

The First Cut begins with a detailed description of the strategy you are investigating. You start by 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.”[?]

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 for pregnancy:

Juvenile girls at risk of pregnancy and living in the urban core

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 who 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.[?]

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 and 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 market[?]

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 fundraising 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.

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 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. 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 in person or on-line. 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.

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 position in the marketplace, and yours, no matter what it is, cannot be evaluated without one.[?]

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 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-it-or-leave-it charity cases.

As such, it could be a viable strategy to 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.”[?] 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.[?]

Here’s what you have so far:

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.

Market

Once you have the description of the strategy, you dig deeper into the market by addressing the probabilities for success and the value proposition.

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 now 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.”[?] 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 buy your service or product at the price you have tentatively establish and test out your propositions 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 and . 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 business 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, 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 succeed. You don’t have to go overboard and spend tons of money to do this. Conversations with a half dozen customers may do it.

Proposition

The value proposition is the at the core of marketing and is defined as “the value of what you get relative to what give in exchange for it.”[?] Put directly, why would your customer write the check? Maybe the answer is that the customer wouldn’t, 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 customers, and practiced the art of observation to construct his value proposition. He told me how he chose the location for his art gallery, 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.

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 the 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.”[?]

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 and conditions influencing an industry’s profitability potential and an analysis of competitors is focused on predicting competitors’ actions, responses, and intentions.”[?]

In this classic approach, you examine the general environment consisting of “seven environmental segments: demographic, economic, political/legal, sociocultural, technological, global, and physical.”[?] 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 of threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry among existing competitors.[?] 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.[?]

Finally, you analyze your competitors using the following four questions:

▪ What drives the competitor, as shown by its future objectives.

▪ What the competitor is doing and can do, as revealed by its current strategy.

▪ What the competitor believes about the industry as evidenced by its assumptions.

▪ What the competitor’s capabilities are, as shown by its strengths and weaknesses.[?]

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,[?] you 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 |Industry |Competitor |

|Strategy 1 | | | |

|Strategy 2 | | | |

|Strategy 3 | | | |

Capacity

When you get right down to it, “organizational capacity is the ability of an organization to operate its business,” says the Nonprofit Finance Funds’ Clara Miller. [?] If context is about what is happening outside the agency, capacity is about the inside. There are three useful ways to think about capacity including 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 Michael Hitt, Duane Ireland, and Robert 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.”[?] Once compete, 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.”[?] 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.[?]

Core competencies that pass the tests are often the sources of sustainable 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.

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 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.”[?]

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.”[?] 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.[?] 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 shelter. Because 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. 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. Although 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 provided the organizational capacity is in place to handle the load, but at some point, too many businesses is 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-center 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 business; the question is always whether your intended strategy is mission-centered or not.

Degree of diversification is affected by a variety of things. Funders typically support new programs as opposed to on-going 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.”[?] 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.[?]

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

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.”[?] 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 |Culture |

|Mission |Performance as shared value |

|Vision – clarity |Other shared beliefs and values |

|Vision – boldness |Shared references and practices |

|Overarching goals |Strategy |

|Organizational skills |Overall strategy |

|Performance management |Goals/performance targets |

|Planning |Program relevance, and integration |

|Fund-raising and revenue generation |Program growth and replication |

|External relationship building and |New program development |

|management |Funding model |

|Other organizational skills |Human resources |

|Systems and infrastructure |Staffing levels |

|Systems |Board – composition and commitment |

|Infrastructure |Board – involvement and support |

|Organizational structure |CEO/executive director and/or senior management team |

|Board governance |Management team and staff – dependence on CEO/executive director |

|Organizational design |Senior management team (if not previously covered) |

|Interfunctional coordination |Staff |

|Individual job design |Volunteers[?] |

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.”[?] 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.[?]

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.

Table B.4 Comprehensive Organizational Financial Success Measures

|($ in thousands) |

The working capital and 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.”[?] 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.[?] For more formulas to help calculate risk tolerance and financial condition, Thomas McLaughlin is the go-to source.[?]

Comparisons

Remember from earlier in this book that 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.”[?]

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 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.

Table B.5 Best of Best Comparisons

|Agency |Best A | Best B | Best C |A, B, C Average |Our Agency |

|Years of 990 data reviewed |5 |6 |6 | |6 |

|Profit and Loss | | | | | |

| Contributed Revenue $ |631,945 |48,333 |146,720 |275,666 |129,721 |

|Program Services $ |649,495 |233,808 |207,096 |363,466 |0 |

|Membership dues $ |87,497 |253,975 |452,606 |264,693 |14,262 |

|Other Earned Revenue $ |145,739 |166,980 |320,266 |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 |

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 per-client 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.”[?]

Match

In order to decide what goes forward, return to Chapter 8 and the section on fast and slow for suggestions on how to make the decision.

A final word of caution about the launch of any strategy built upon the hope of generating profits for your agency: “a large share fail.”[?] A survey from Community Wealth Ventures found only 42 percent of ventures achieved profitability and just five percent (four agencies) of all the 72 studied earned more than $50,000 in profit.[?] 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.”[?] 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.[?] 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.[?] Indeed, most – two out of three – don’t do it for the money, but for the social impact.[?]

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 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 upon which study you consider, from 47 percent to 58 percent of all monies flowing into nonprofits are of the earned income variety.[?] Although earned income, social enterprise, social entrepreneurship, fourth-sector activity, or whatever you want to call it, is the newest, hottest topic, it has been around a long, long time.[?]

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.”[?] 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.”[?]

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.[?]

Appendix C: Final Answer

Final 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 upon the information you have collected in the First Cut and expand upon it. Peter Brinkerhoff 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?[?]

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?[?]

Marketing

You will likely want to do more thorough research and move from direct conservation 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. [?]

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.”[?]

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?[?]

This all adds up to a marketing plan that according to Christopher Lovelock should include situation analysis, marketing program goals, 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 on[?]

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 nonprofit will have the expertise onboard to get to 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, when you need it, and where you will get it. To answer the first three questions and 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 statement 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.[?]

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

▪ What are your break-even projections per month and per year?

▪ How long will it take to reach your break-even 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?[?]

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 both 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 as 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 after-glow 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, when you need it, 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 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 the most for-profit mergers fail.[?] Although there are far fewer nonprofit mergers,[?] the success rate appears to be much higher; expert David La Piana pegs his own success rate at about 70 percent.[?]

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;”[?] Jan Masaoka, formerly of CompassPoint concludes that “nonprofit mergers don’t result in reducing administrative costs;”[?] and Robert Harrington, with La Piana Associates agrees, “Organizations probably should not enter into a merger with the primary goal of saving money.”[?]

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.”[?]

Management

Management includes a potpourri of issues including corporate structuring (e.g. for-profit, non-profit), 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.”[?] 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.”[?] And based upon 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 are questions that 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 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 imbedded 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, 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.”[?] 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 the market.”[?] That’s why you need to think about contingencies up front. The reason is eloquently summarized by 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.[?]

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.[?]

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?[?]

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.

4) Skills Mistakes: Leadership Too Weak, Communication Too Poor . . . Undervaluing and underinvesting in the human side of innovation[?]

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 fundraising, and then strategy.[?] In other words, what holds you back will be a lack of financial sustainability and fundraising; 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.[?] That is, you must keep these two approaches in balance.

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.”[?] 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.[?]

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 are relevant to the strategy, but consider the following ones to begin with:

▪ Marketing – 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 when?

▪ 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 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 or not. Although about half of all nonprofits launching ventures skip this step and move right to implementation, a little over half find do a business plan.[?] In the for-profit sector, the number is lower; Amar Bhide learned that only three in 10 founders of entrepreneurial companies wrote up full-blown business plans and two out of five had no plan at all.[?]

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.”[?] Others see the business plan as a communication device used primarily to represent a specific strategy to stakeholders in general and funders in particular.[?] 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.[?] For Peter Brinkerhoff, 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).[?]

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

II. Financial Data

A. Loan applications

B. Capital equipment and supply list

C. Balance sheet

D. Breakeven analysis

E. Pro-forma income projections (profit & loss statements)

F. Three-year summary

G. Detail by month, first year

H. Detail by quarters, second and third years

I. Assumptions upon 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.[?]

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 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.[?]

Final Answer

How to pull 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 the decision making results in Good Ideas and First Cut, you can put together a strong discussion document and reach a final answer about what to do next. The question here is a simple albeit critically important one: Is your strategy feasible based upon 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.”[?] 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 toward the lower end of the scale.”[?]

One of the fundamental reasons for the dismal track record is because people resist change.[?] Indeed, people in organizations “often resist change even when their environments threaten them with extinction.”[?] James O’Toole puts it as direct 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.”[?]

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.”[?]

Before closing, you have one last chance to reconsider your decision to go forward by using a list of questions from Jeffrey Pfeffer and Robert Sutton:

1. Is the practice better than what you are doing right now?

2. Is the change really worth the time, money, and disruption?

3. Is it best to make only symbolic changes instead of core changes?

4. Is doing the change good for you, but bad for the company?

5. Do you have enough power to make the change happen?

6. Are people already overwhelmed by too many changes?

7. Will people be able to learn and update as the change unfolds?

8. Will you be able to pull the plug? [?]

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

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. [?]

Of all these steps, the first is most salient, “Dissatisfaction proves 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.” [?]

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.’”[?] And don’t forget the words of Michael Porter, “The essence of strategy is choosing what not to do.”[?] Or as late David Packard once warned, “More businesses die from indigestion than starvation.”[?]

Appendix D: Board Meeting Advance Information Template

Table of Contents

Board Meeting Agenda

|Topic |Convener |Minutes |See Page # |

|Call to Order |Chair |5 | |

|Minutes of Last Meeting | | | |

|Consent Agenda | | | |

|Accountability | | | |

|Financials |Treasurer |10 | |

|Executive Director Summary |Executive Director |10 | |

|Governance |Vice Chair |10 | |

|Central Meeting Content |TBA |60 | |

|No surprises discussion |Executive Director |5 | |

|Chair’s Comments |Chair |5 | |

|Open discussion |Chair |10 | |

|assessments |Chair |5 | |

|Adjournment |Chair | | |

| | |120 | |

Executive Summary

Overview

Lines of Business

Results Now Master Plan

|STRATEGIC PLAN |OPERATING PLAN |

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

|Lines of Business |goals |

|success measures |Budget |

|vision | |

|Delegation |Accountability |

|Who does what? |When did it happen? |

|Duties |Agendas |

|Guidelines |Assessments |

|GOVERNANCE PLAN |

Purpose – Why

Mission

Values

Strategic Plan – Where to Go Tomorrow

Lines of Business

Success Measures

| |

| | |

|Board Chair |

| | |

| | | | | | | | | | |

|Committee |Committee | | |Committee |Committee |

|Executive Director |

| | |

| | | | | | | | |

|Administration |Development |Marketing |Programs |

Board goals

Officers

Committees

Staff goals

Administration

Development

Marketing

Programming

Budget

| |ACTUAL |BUDGET |FORECAST |DIFFERENCE |

| |For Yr Ending |For Yr Ending |For Yr Ending X/XX/XX|Column 3 less Column |

| |X/XX/XX |X/XX/XX | |2 |

|PROFIT AND LOSS | | | | |

|REVENUE | | | | |

|Earned Revenue | | | | |

| | | | | |

| | | | | |

|Contributed Revenue | | | | |

| | | | | |

| | | | | |

|Total Revenue | | | | |

|EXPENSES | | | | |

|Program Services | | | | |

| | | | | |

| | | | | |

|Management and General | | | | |

| | | | | |

| | | | | |

|Fundraising | | | | |

| | | | | |

| | | | | |

|Total Expenses | | | | |

|Net Revenue | | | | |

|Add Back Accrual Expenses | | | | |

|Cash Net Revenue | | | | |

|BALANCE SHEET | | | | |

|Assets | | | | |

| | | | | |

|Total Assets | | | | |

|Liabilities | | | | |

| | | | | |

| | | | | |

|Net Assets | | | | |

| | | | | |

| | | | | |

|Total Liabilities & Net Assets | | | | |

Governance – Delegation: Who does what

Duties and Guidelines

|Board |

|Board Duties |Board, Committee, and Officer Guidelines |

|Committee Duties | |

|Officer Duties | |

|Board Member |

|Duties |Guidelines |

|Executive Director |

|Duties |Guidelines |

Governance – Accountability: When Did It Happen

Annual Agenda

|Who-When-Where |What |

|Full Board – February | |

|Full Board – May | |

|Full Board – July | |

|Full board – September | |

|Full board – November |Results Now Master Plan first draft |

|Full board – December |Results Now Master Plan final draft |

Assessments

|Board Assessment Summary |

|Board Duties: (4=best) |

|What should we discuss at upcoming meetings? |What did you like about the meeting? |What did you not like about this meeting? |

|Board Member Assessment Summary |

|Board Member Duties: (4=best) |

|What can be done to help you do your best as a|What do you like about being a board member? |What don’t you like about being a board member?|

|board member? | | |

|Executive Director Assessment Summary |

|Executive Director Duties: (4=best) |

|What should our executive director discuss at |What do you like about the way our executive |What one thing would you change about the way |

|the next board meeting? |director works with the board and/or board |our executive director works with the board |

| |members? |and/or board members? |

Board Member Attendance

| |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

|Board Guidelines: Circle how the full board did today to respect its guidelines (4=best) |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

|Comments: |

|What should we discuss at upcoming meetings? |What did you like about the meeting? |What did you not like about this meeting? |

Board Member Assessment Form

|Board Member Duties: Circle how you have done recently to accomplish your duties (4=best) |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

|Board Member Guidelines: Circle how you have done recently to respect your guidelines (4=best) |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

|Comments: |

|What can be done to help you do your best as a |What do you like about being a board member? |What don’t you like about being a board member?|

|board member? | | |

Executive Director Assessment Form

|Executive Director Duties: Circle how the ED has done recently to accomplish the duties (4=best) |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

|Executive Director Guidelines: Circle how the ED has done recently to respect the guidelines (4=best) |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

| |1 |2 |3 |4 |

|Comments: |

|What should our executive director discuss at |What do you like about the way our executive |What one thing would you change about the way |

|the next board meeting? |director works with the board and/or board |our executive director works with the board |

| |members? |and/or board members? |

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-----------------------

[1] Total Margin: Positive is better; (Total Revenue minus Total Expenses) divided by Total Revenue

[2] Current Ratio: >2 is preferred; Current Assets divided by Current liabilities

[3] Total Margin: Positive is better; (Total Revenue minus Total Expenses) divided by Total Revenue

[4] Current Ratio: >2 is preferred; Current Assets divided by Current liabilities

[5] Operating Reserves: Unrestricted Net Assets minus [(Land, Buildings, and Equipment) minus (Mortgages and Other Notes Payable)]

[6] Operating Reserves Ratio: >3 months is minimum; Operating Reserves divided by [(Total Functional Expenses minus Depreciation) divided by 12] (A. Blackwood and T. Pollak, 2009, p. 9)

[7] Working Capital: (Cash, Savings, Accounts Receivable, Pledges Receivable, Grants Receivable, Investments, and perceivable liquid Other Investments) minus (Accounts Payable, Grants Payable, and Other Liabilities) (L. Giles, September 11, 2009)

[8] Working Capital Ratio:>1 year is best; Working Capital divided by Total Expenses

-----------------------

[i] D. Linnell, 2003, p. 5

[ii] H. Mintzberg, 1994a, p. 111

[iii] M. M. Stone, B. Bigelow and W. Crittenden, 1999, p. 409

[iv] K. LeRoux and N. S. Wright, 2010, p. 583

[v] R. S. Kaplan and D. P. Norton, 1996, p. 81

[vi] J. Carver and M. M. Carver, 1997, p. 30

[vii] W. G. Bowen, 1994b, p. 29 italics as written

[viii] P. B. Crosby, 1979, p. 66

[ix] J. Peters and T. Wolfred, 2001, p. 4

[x] Ibid., p. 21

[xi] Ibid., p. 3

[xii] J. G. Dees and P. Economy, 2001, p. 1

[xiii] J. Carver, 1997; R. Chait, T. Holland and B. Taylor, 1996; J. G. Dees, P. Economy and J. Emerson, 2001; P. Light, 2002b

[xiv] J. Peters and T. Wolfred, 2001, p. 14

[xv] Ibid., p. 20

[xvi] P. Light, 2002a, pp. 9-10

[xvii] Ibid., p. 10

[xviii] C. J. D. Vita and C. Fleming, 2001, p. 4

[xix] P. Light, 2002a, p. 12

[xx] Ibid., p. 9

[xxi] L. Brenner, 2008, p. 8

[xxii] J. Peters and T. Wolfred, 2001

[xxiii] How the economy looks to you, 2008

[xxiv] C. B. Handy, 1998, p. xix

[xxv] C. Letts, W. P. Ryan and A. Grossman, 1999

[xxvi] P. F. Drucker, 1974, p. 45

[xxvii] K. S. Cameron, 1986, pp. 539-544

[xxviii] R. Herman and D. Renz, 1998; R. Herman and D. Renz, 1999; B. Kibbe, 2004; S. C. Selden and J. E. Sowa, 2004; J. E. Sowa, S. C. Selden and J. Sandfort, 2004

[xxix] D. P. Forbes, 1998, p. 183

[xxx] R. Herman and D. Renz, 1999, p. 121

[xxxi] B. Wolverton, 2004

[xxxii] R. Herman and D. Renz, 1999, p. 122

[xxxiii] P. F. Drucker, 1999, p. 8

[xxxiv] C. Gunter, 2003

[xxxv] D. L. Farror, E. R. Valenzi and B. M. Bass, 1980

[xxxvi] A. M. Parhizgari and G. R. Gilbert, 2004, p. 221; ibid.

[xxxvii] J. Peters and T. Wolfred, 2001

[xxxviii] M. Wiersema, 2002

[xxxix] R. M. Kanter and D. V. Summers, 1987, p. 154

[xl] N. Kleiman and N. Rosenbaum, 2007, p. 4

[xli] R. D. Shriner, 2001, emphasis as written

[xlii] R. Herman and D. Renz, 1998, pp. 25-26

[xliii] D. Renz and R. Herman, 2004, p. 10

[xliv] R. Herman and D. Renz, 1998, pp. 25-26

[xlv] R. Herman and D. Renz, 1997, p. 202

[xlvi] R. Herman and D. Renz, 2004, p. 695

[xlvii] D. Renz and R. Herman, 2004, p. 10 bolded as written

[xlviii] M. E. Porter, 1996, p. 62

[xlix] D. Renz and R. Herman, 2004, p. 10

[l] D. Linnell, 2003, p. 5

[li] E. E. Olson and G. H. Eoyang, 2001, p. 62

[lii] P. Sellers and E. Gustafson, 2009

[liii] J. C. Collins and J. I. Porras, 1994, p. 10

[liv] R. Herman and D. Renz, 2003, p. 6

[lv] R. Herman and D. Renz, 2008, p. 405

[lvi] D. Renz, 2005

[lvii] K. S. Cameron, 1984, p. 279

[lviii] A. S. Tsui, 1984, p. 93

[lix] R. M. Kanter and D. Brinkerhoff, 1981, p. 345

[lx] M. M. Stone and S. Cutcher-Gershenfeld, 2002, p. 39

[lxi] B. Blumenthal, 2003, pp. 21,

[lxii] What? Me Measure?, 2004, p. 5

[lxiii] K. P. Enright, 2004, pp. 10-11

[lxiv] K. S. Cameron and D. A. Whetten, 1983, p. 2

[lxv] R. Cohen, 2004, pp. 147-148

[lxvi] K. S. Cameron, 1986, p. 544

[lxvii] J. E. Sowa, S. C. Selden and J. Sandfort, 2004, pp. 711-712

[lxviii] Quoted in G. Williams, 2002

[lxix] R. Herman and D. Renz, 1997, p. 202

[lxx] K. S. Cameron and D. A. Whetten, 1983, p. 2

[lxxi] R. Herman and D. Renz, 1997, p. 202

[lxxii] P. Connolly and P. York, 2002, p. 33; K. P. Kearns, 2004, p. 438

[lxxiii] R. Cohen, 2004, p. 4; D. Linnell, 2003, p. 13; P. McPhee and J. Bare, 2001, p. 1

[lxxiv] P. Connolly, P. York, S. Munemitsu, C. Ruiz-Healy, A. Sherman and C. Trebb, 2003, p. 1; ibid.

[lxxv] Organizational effectiveness - updated, 2003

[lxxvi] L. Campobasso and D. Davis, 2001, p. 4

[lxxvii] B. Kibbe, 2004, p. 4

[lxxviii] K. P. Kearns, 2004, p. 437

[lxxix] D. Linnell, 2003, p. 13

[lxxx] Ibid., p. 13

[lxxxi] B. Kibbe, 2004, p. 4

[lxxxii] J. E. Lee, ibid., pp. 64-65

[lxxxiii] B. Kibbe, ibid.

[lxxxiv] C. Letts, W. P. Ryan and A. Grossman, 1999

[lxxxv] P. Light, 2002b, p. 30

[lxxxvi] R. Herman and D. Renz, 1999, p. 123

[lxxxvii] P. Light, 2002b

[lxxxviii] R. Herman and D. Renz, 1998

[lxxxix] P. B. Crosby, 1979, p. 66

[xc] G. A. Miller, E. Galanter and K. H. Pribram, 1960

[xci] D. Lester, 1995, p. 72

[xcii] J. M. Burns, 1978, p. 455

[xciii] R. A. Heifetz, 1994; P. G. Northouse, 2001; G. Yukl, 2002

[xciv] D. Rigby, 2003, p. 2

[xcv] C. Krauss, 2003

[xcvi] W. G. Bennis and R. J. Thomas, 2002

[xcvii] D. Rigby and B. Bilodeau, 2009

[xcviii] P. Light, 2002b, pp. 171-176

[xcix] Ibid., pp. 171, 176

[c] S. J. Wiener, A. D. Kirsch and M. T. McCormack, 2002, p. 68

[ci] 2005 MSO Benchmarking Survey Results, 2005

[cii] S. J. Wiener, A. D. Kirsch and M. T. McCormack, 2002

[ciii] Ibid., p. 26

[civ] P. Light, 1998, p. 16

[cv] R. S. Kaplan and D. P. Norton, 1996, p. 82

[cvi] K. M. Hopkins and C. Hyde, 2002, p. 11

[cvii] Ibid., p. 11

[cviii] H. Mintzberg, 1994b, p. 324

[cix] H. Mintzberg, 1994a, p. 111

[cx] D. Lovallo and D. Kahneman, 2003, p. 57

[cxi] A. Blackwood, K. Wing and T. Pollak, 2008

[cxii] C. Yoshioka and R. Ashcraft, 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 Center database. The estimate included viable agencies only. Applying the ratio found in Arizona nationally yields a field of just over 3 million.

[cxiii] S. J. Wiener, A. D. Kirsch and M. T. McCormack, 2002, p. 66

[cxiv] T. Wolfred, M. Allison and J. Masaoka, 1999

[cxv] J. M. Bryson, 1995

[cxvi] M. Allison and J. Kaye, 1997, pp. 52-53

[cxvii] B. W. Barry, 1997

[cxviii] R. Bradford, J. P. Duncan and B. Tarcy, 2000, pp. 30-31

[cxix] J. C. Collins and J. I. Porras, 1994, p. 9

[cxx] C. R. Schwenk and C. B. Shrader, 1993, p. 60

[cxxi] Quoted in A. Bhide, 1994, p. 150

[cxxii] Ibid., p. 152

[cxxiii] H. Mintzberg, 1994b, p. 342

[cxxiv] H. Mintzberg, 1978, p. 943; ibid., p. 943

[cxxv] J. A. Kay, 1995, p. 266

[cxxvi] B. K. Boyd, 1991, p. 369

[cxxvii] N. Capon, J. U. Farley and J. M. Hulbert, 1994, pp. 109-110

[cxxviii] C. Miller and L. Cardinal, 1994, p. 1662

[cxxix] M. M. Stone, B. Bigelow and W. Crittenden, 1999, p. 391

[cxxx] P. Light, 2002b

[cxxxi] M. M. Stone, B. Bigelow and W. Crittenden, 1999, p. 391

[cxxxii] R. Herman and D. Renz, 1999, p. 117

[cxxxiii] J. I. Siciliano, 1997, p. 387

[cxxxiv] M. M. Stone, B. Bigelow and W. Crittenden, 1999, p. 391

[cxxxv] H. Mintzberg, 1994b, p. 333

[cxxxvi] D. Myers and A. Kitsuse, 2000, p. 221

[cxxxvii] H. Mintzberg, 1994b, p. 379

[cxxxviii] J. C. Collins and J. I. Porras, 1994, p. 9

[cxxxix] L. Bossidy, R. Charan and C. Burck, 2002, p. 15

[cxl] H. Mintzberg, 1994b, p. 393

[cxli] L. D. Goodstein, T. M. Nolan and J. W. Pfeiffer, 1993, pp. 4-5

[cxlii] E. D. Beinhocker and S. Kaplan, 2002, p. 51

[cxliii] M. Allison and J. Kaye, 1997, pp. 7-8

[cxliv] J. M. Bryson and F. K. Alston, 1996

[cxlv] J. M. Bryson, 1995, p. 7

[cxlvi] B. W. Barry, 1997

[cxlvii] W. G. Bowen, 1994b, p. 29

[cxlviii] Quoted in M. Walton, 1986, p. 55

[cxlix] H. Gardner and E. Laskin, 1995, p. 43

[cl] Raising money: Tips for start-up organizations, 2000, p. 5

[cli] D. Rigby and B. Bilodeau, 2009

[clii] P. Light, 2002b, pp. 171, 176

[cliii] 2005 MSO Benchmarking Survey Results, 2005

[cliv] M. M. Stone, B. Bigelow and W. Crittenden, 1999, p. 409

[clv] Ibid., p. 409

[clvi] L. R. Frank, 2001, p. 833

[clvii] W. F. Crittenden, V. L. Crittenden, M. M. Stone and C. J. Robertson, 2004, p. 99

[clviii] W. E. Crittenden, V. L. Crittenden and T. G. Hunt, 1988, p. 68

[clix] S. R. Covey, 1989, p. 76

[clx] P. Light, 1998, p. 23

[clxi] L. R. Frank, 2001, p. 934

[clxii] E. D. Beinhocker and S. Kaplan, 2002, p. 55

[clxiii] R. Herman and D. Renz, 1999, p. 117

[clxiv] Ibid., p. 123

[clxv] H. Mintzberg, 1994a, pp. 415-416

[clxvi] M. E. Porter, 1987, p. 18

[clxvii] P. F. Drucker, 1990, p. 152

[clxviii] H. Mintzberg, 1994a, p. 111

[clxix] J. Carver and M. M. Carver, 1997, p. 30

[clxx] W. G. Bowen, 1994b, p. 29

[clxxi] J. Carver, 1997

[clxxii] J. L. Brudney and P. D. Nobbie, 2002

[clxxiii] C. Oliver and M. Conduff, 1999

[clxxiv] P. D. Nobbie and J. L. Brudney, 2003

[clxxv] S. R. Covey, 1989, pp. 70-71

[clxxvi] P. F. Drucker, 1990, p. 152

[clxxvii] S. Anthony, 2010. The General’s actual quote was “No plan of battle ever survives contact with the enemy.”

[clxxviii] A. Hill and J. Wooden, 2001, p. 72

[clxxix] H. Mintzberg, B. W. Ahlstrand and J. Lampel, 1998, p. 11

[clxxx] L. R. Frank, 2001, p. 791

[clxxxi] T. J. Peters and R. H. Waterman, 1982, p. 13

[clxxxii] E. D. Beinhocker and S. Kaplan, 2002, p. 53 bolded as written

[clxxxiii] C. Crowe, 1998, pp. 34-36

[clxxxiv] Ibid., p. 34

[clxxxv] Ibid., p. 38

[clxxxvi] D. H. Pink, 2009, p. 204

[clxxxvii] D. Crary, 2008; Josephson Institute's report card on American youth: There's a hole in moral ozone and it's getting bigger, 2008

[clxxxviii] R. Dawkins, 1989; R. Shorrock, 2007

[clxxxix] J. Ciulla, 1995, p. 5

[cxc] L. K. Treviño and K. A. Nelson, 2007, p. xv

[cxci] B. George, 2003, p. 1

[cxcii] T. M. Jones, 1991, p. 366

[cxciii] National business ethics survey: An inside view of private sector ethics, 2007, p. v

[cxciv] National business ethics survey: Ethics in the recession, 2009, p. 10

[cxcv] R. E. Freeman and L. Stewart, 2006, p. 2

[cxcvi] J. Badaracco, 2002, p. 35

[cxcvii] 100 most influential in business ethics, 2007

[cxcviii] R. E. Freeman and L. Stewart, 2006, p. 2

[cxcix] L. K. Treviño and M. E. Brown, 2004, pp. 71-72

[cc] National business ethics survey: An inside view of private sector ethics, 2007, p. 9

[cci] Ibid., p. 9

[ccii] K. S. Cameron and R. E. Quinn, 1999, p. 14

[cciii] E. H. Schein, 1999

[cciv] J. C. Collins and J. I. Porras, 1994, p. 71

[ccv] G. Yukl, 2006, pp. 291-292

[ccvi] S. Harter, 2002, p. 382

[ccvii] F. Luthans and B. J. Avolio, 2003, p. 242 italics removed

[ccviii] B. J. Avolio, W. L. Gardner, F. O. Walumbwa, F. Luthans and D. R. May, 2004, p. 802

[ccix] F. Luthans and B. J. Avolio, 2003, pp. 248-249

[ccx] J. H. Davis, F. D. Schoorman, R. C. Mayer and H. H. Tan, 2000

[ccxi] L. Huff and L. Kelley, 2003

[ccxii] J. M. Kouzes and B. Z. Posner, 2002, p. 14

[ccxiii] J. C. Collins and J. I. Porras, 1994, p. 73

[ccxiv] J. Winokur, 1992, p. 194

[ccxv] J. C. Collins and J. I. Porras, 1994, p. 73

[ccxvi] P. F. Drucker, 1989, p. 89

[ccxvii] Ibid., p. 89

[ccxviii] P. Light, 1998, pp. 254-255

[ccxix] C. E. Larson and F. M. J. LaFasto, 1989, p. 27

[ccxx] C. K. Bart, 1997, p. 9

[ccxxi] J. A. Phills, 2004, p. 52

[ccxxii] V. K. Rangan, 2004, pp. 112, 114

[ccxxiii] F. David and F. David, 2003, p. 11

[ccxxiv] J. A. Pearce II, 1982, p. 15

[ccxxv] M. Allison and J. Kaye, 1997, p. 57

[ccxxvi] J. C. Collins and J. I. Porras, 1994

[ccxxvii] D. Rigby and B. Bilodeau, 2009

[ccxxviii] M. C. Baetz and C. K. Bart, 1996; C. K. Bart and M. C. Baetz, 1998; B. Bartkus, M. Glassman and B. McAfee, 2006; J. A. Pearce II, 1982; J. A. Pearce II and F. David, 1987

[ccxxix] J. A. Phills, 2004, p. 52

[ccxxx] P. Sellers and E. Gustafson, 2009

[ccxxxi] Quoted in K. Blanchard and S. Bowles, 1993, pp. ix-x

[ccxxxii] P. F. Drucker and J. C. Collins, 2008, p. 2

[ccxxxiii] Ibid., p. 23

[ccxxxiv] Ibid., p. 23

[ccxxxv] Ibid., p. 25

[ccxxxvi] Ibid., p. 26

[ccxxxvii] Numbers in parenthesis are results of a multi-voting rating process where participants could vote $3, $2, and $1 in any combination for their highest rated grouping of ideas; higher numbers = higher rating.

[ccxxxviii] J. A. Pearce II and F. David, 1987, p. 109

[ccxxxix] M. E. Porter, 1996

[ccxl] D. La Piana, 2008

[ccxli] M. E. Porter, 1996, p. 62

[ccxlii] D. La Piana and M. Hayes, 2005, p. 22

[ccxliii] T. O. Jones and W. E. Sasser, Jr., 1995, p. 89 italics removed

[ccxliv] F. F. Reichheld, 2001, p. 2

[ccxlv] D. La Piana, 2008, p. 36

[ccxlvi] M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009

[ccxlvii] D. H. Pink, 2009, pp. 154-155

[ccxlviii] J. Carver and M. M. Carver, 1997, p. 144

[ccxlix] C. Finney, 2008

[ccl] P. F. Drucker, 1999, p. 20

[ccli] J. C. Collins and J. I. Porras, 1994, p. 9

[cclii] Muggsy Bogues, 2010

[ccliii] M. E. Porter, 1998

[ccliv] M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009, p. 4

[cclv] D. La Piana and M. Hayes, 2005, p. xx

[cclvi] H. Mintzberg, 1994a, p. 111

[cclvii] Powering social change: Lessons on community wealth generation for nonprofit sustainability, 2003

[cclviii] M. E. Porter, 1998, p. xxviii

[cclix] Ibid.

[cclx] R. D. Shriner, 2001

[cclxi] G. Mandler, 1967; G. A. Miller, 1956

[cclxii] C. Miller, 2008b

[cclxiii] R. S. Kaplan and D. P. Norton, 1992, p. 71

[cclxiv] M. E. Porter, 1998, p. xxviii

[cclxv] W. G. Bowen, 1994b, p. 9

[cclxvi] J. C. Collins, 2005, p. 5

[cclxvii] M. E. Porter and M. R. Kramer, 1999, p. 124

[cclxviii] R. E. Herzlinger, 1996, p. 99

[cclxix] R. M. Kanter and D. V. Summers, 1987, p. 154

[cclxx] P. F. Drucker, 1989, p. 89

[cclxxi] Y. Baruch and N. Ramalho, 2006; J. Masaoka, 2005

[cclxxii] L. Silverman and L. Taliento, 2006, p. 39

[cclxxiii] B. A. Weisbrod, 2002, p. 275

[cclxxiv] S. Kerr, 1975

[cclxxv] The sector's future depends on boards, 1996, p. 10

[cclxxvi] D. Renz and R. Herman, 2004, p. 10

[cclxxvii] W. G. Bowen, 1994b, p. 127

[cclxxviii] M. E. Porter, 1998, p. xxviii

[cclxxix] J. S. Livingston, 1988, p. 126

[cclxxx] H. Hatry, T. v. Houten, M. Plantz and M. Taylor, 1996, p. 8

[cclxxxi] C. Miller, 2010, p. 24

[cclxxxii] T. McLaughlin, 2001, p. 255

[cclxxxiii] K. A. Froelich, T. W. Knoepfle and T. H. Pollak, 2000, p. 251

[cclxxxiv] L. R. Frank, 2001, p. 791

[cclxxxv] M. E. Porter, 1998, p. xxviii

[cclxxxvi] C. Crowe, 1998, p. 38

[cclxxxvii] W. G. Bennis and B. Nanus, 1997, p. 17; J. Collins and J. Porras, 1991, p. 30; S. R. Covey, 1989, p. 101; M. De Pree, 1989, p. 9; J. Kotter, 1990, p. 5; J. M. Kouzes and B. Z. Posner, 1995, p. 95; P. M. Senge, 1990, p. 206

[cclxxxviii] Y. Berson, B. Shamir, B. J. Avolio and M. Popper, 2001, p. 54; J. A. Conger, 1989, p. 29; J. W. Gardner, 1990, p. 130; M. Sashkin, 1995, p. 403; N. M. Tichy and M. A. Devanna, 1986, p. 28

[cclxxxix] W. G. Bennis, 1989, p. 194

[ccxc] P. B. Vaill, 2002, p. 18

[ccxci] P. M. Senge, 1990, p. 206

[ccxcii] P. B. Vaill, 2002, p. 28

[ccxciii] G. Yukl, 2002, p. 283

[ccxciv] L. Larwood, C. M. Falbe, P. Miesing and M. P. Kriger, 1995

[ccxcv] W. G. Bennis and B. Nanus, 1997

[ccxcvi] J. Kotter, 1990, p. 68

[ccxcvii] H. Mintzberg, 1994b, pp. 209-210

[ccxcviii] J. M. Strange and M. D. Mumford, 2002, p. 344

[ccxcix] B. Nanus, 1992, pp. 8-9

[ccc] R. Awamleh and W. L. Gardner, 1999, p. 359

[ccci] J. R. Baum, E. A. Locke and S. A. Kirkpatrick, 1998, p. 52

[cccii] J. Kotter, 1990

[ccciii] H. Mintzberg, 1994b, p. 293

[ccciv] L. Korn, 1989, p. 157

[cccv] J. Kotter, 1996; L. Larwood, C. M. Falbe, P. Miesing and M. P. Kriger, 1995; B. Nanus, 1992

[cccvi] W. G. Bennis and R. J. Thomas, 2002

[cccvii] D. Rigby, 2003; D. Rigby and B. Bilodeau, 2009

[cccviii] B. M. Bass and R. M. Stogdill, 1990

[cccix] A. E. Rafferty and M. A. Griffin, 2004, p. 348

[cccx] B. Shamir, E. Zakay, E. Breinin and M. Popper, 1998, p. 400

[cccxi] All in a day's work, 2001, p. 58

[cccxii] N. M. Tichy and E. B. Cohen, 1997, p. 173

[cccxiii] W. G. Bennis and B. Nanus, 1997; P. B. Crosby, 1979, p. 66; J. Kotter, 2000; N. M. Tichy and E. B. Cohen, 1997, p. 173; M. Wheatley, 1999, p. 95

[cccxiv] R. A. Heifetz, 1994, p. 24

[cccxv] H. Mintzberg, 1994b, p. 115

[cccxvi] BrainyQuote, 2001-2010

[cccxvii] J. A. Conger, 1989, p. 38; J. M. Kouzes and B. Z. Posner, 1995, p. 119; P. M. Senge, 1990, p. 208

[cccxviii] H. Gardner and E. Laskin, 1995, p. 11

[cccxix] R. J. House and B. Shamir, 1993, p. 97

[cccxx] BrainyQuote, 2001-2010

[cccxxi] L. Larwood, C. M. Falbe, P. Miesing and M. P. Kriger, 1995; G. Yukl, 2002, p. 283

[cccxxii] J. V. Quigley, 1993, p. xiii

[cccxxiii] G. Yukl, 2002

[cccxxiv] A. E. Guskin, 1997

[cccxxv] W. G. Rowe, 2001, p. 82

[cccxxvi] J. C. Collins and J. I. Porras, 1996, p. 73

[cccxxvii] M. Light, 2007

[cccxxviii] P. Bronson, 2003, p. 75

[cccxxix] as cited in H. Arden, S. Wall and White Deer of Autumn, 1990, pp. 14-15

[cccxxx] J. A. Conger, 1989, p. 66

[cccxxxi] B. Nanus, 1992, p. 44

[cccxxxii] All in a day's work, 2001, p. 56

[cccxxxiii] M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009, p. 6

[cccxxxiv] J. M. Bryson, 1995, p. 23

[cccxxxv] P. Tulenko, 2004

[cccxxxvi] H. Mintzberg, 1994b, pp. 277-279

[cccxxxvii] G. Hamel and C. K. Prahalad, 1989, p. 65

[cccxxxviii] J. M. Bryson, 1988, p. 31

[cccxxxix] H. Mintzberg, 1994b, pp. 270-272

[cccxl] A. Bhide, 1994, p. 150

[cccxli] Ibid., p. 151

[cccxlii] T. McLaughlin, 2002

[cccxliii] M. Buckingham, 2007

[cccxliv] T. Rath, 2007, p. 5

[cccxlv] Ibid., p. 8

[cccxlvi] K. Subramaniam, J. Kounios, T. B. Parrish and M. Jung-Beeman, 2009

[cccxlvii] J. Lehrer, 2008

[cccxlviii] T. McLaughlin, 2002

[cccxlix] J. A. Beineke and R. H. Sublett, 2002, p. 51

[cccl] M. E. Porter, 1998, p. xxviii

[cccli] P. Brinckerhoff, 2000; M. Light, 2007, p. 166

[ccclii] P. Brinckerhoff, 2000, p. 32

[cccliii] P. F. Drucker and J. C. Collins, 2008, p. 2

[cccliv] Ibid., p. 11

[ccclv] P. F. Drucker, 1999, p. 17

[ccclvi] L. M. Salamon, S. L. Geller and K. L. Mengel, 2010, p. 11

[ccclvii] Ibid., p. 14

[ccclviii] P. F. Drucker and J. C. Collins, 2008, p. 23

[ccclix] Ibid., p. 25

[ccclx] Ibid., p. 28

[ccclxi] Ibid., p. 29

[ccclxii] K. Majeska, 2001, p. 247

[ccclxiii] T. J. Peters and R. H. Waterman, 1982, p. 156

[ccclxiv] M. Buckingham, 2007, p. 6

[ccclxv] D. Rigby and B. Bilodeau, 2009

[ccclxvi] J. Saul, 2004, p. 1 italics added

[ccclxvii] G. J. Stigler, 1958, p. 58

[ccclxviii] S. M. Oster, 1995, p. 42

[ccclxix] A. Bhide, 1994

[ccclxx] L. M. Salamon, S. L. Geller and K. L. Mengel, 2010, p. 3

[ccclxxi] W. C. Kim and R. Mauborgne, 2004, p. 80

[ccclxxii] D. Lovallo and D. Kahneman, 2003

[ccclxxiii] Ibid., p. 60

[ccclxxiv] Adapted from P. Brinckerhoff, 2000, p. 47

[ccclxxv] G. J. Wedig, 1994

[ccclxxvi] L. Wagner and M. Hager, 1998

[ccclxxvii] P. Brinckerhoff, 2001, p. 13

[ccclxxviii] Ibid., p. 13

[ccclxxix] C. F. Chang and H. P. Tuckman, 1991, pp. 560-561

[ccclxxx] J. M. Trussel, 2002, p. 28

[ccclxxxi] Ibid., pp. 23-24

[ccclxxxii] B. Nanus, 1992, pp. 8-9

[ccclxxxiii] M. Allison and J. Kaye, 1997, p. 73

[ccclxxxiv] J. M. Bryson, 1995, p. 139

[ccclxxxv] P. F. Drucker, 1985, p. 68

[ccclxxxvi] M. E. Porter, 1996

[ccclxxxvii] R. Moyers and K. Enright, 1997

[ccclxxxviii] T. Holland and M. Blackmon, 2000, p. 7

[ccclxxxix] (J. C. Collins & Porras, 1994, pp. 95-96)

[cccxc] J. M. Bryson, 1995, p. 139

[cccxci] L. R. Frank, 2001, p. 910

[cccxcii] C. Crowe, 1998, p. 58

[cccxciii] L. M. Salamon, S. L. Geller and K. L. Mengel, 2010

[cccxciv] J. A. Schumpeter, 1983

[cccxcv] J. G. Dees, 2001, pp. 163-164

[cccxcvi] Ibid., p. 169

[cccxcvii] R. Brewster, 2008, p. 63

[cccxcviii] Ibid., p. 63

[cccxcix] H. I. Ansoff, 1957, p. 113

[cd] P. B. Carroll and C. Mui, 2008; B. Nolop, 2007

[cdi] T. J. Peters and R. H. Waterman, 1982, p. 293

[cdii] S. T. Helm and F. O. Andersson, 2010

[cdiii] Ibid., p. 263

[cdiv] W. C. Kim and R. Mauborgne, 2004, p. 80

[cdv] P. C. Nutt, 1999, p. 75

[cdvi] Ibid., p. 75

[cdvii] M. Light, 2007

[cdviii] J. S. Hammond, R. L. Keeney and H. Raiffa, 1998

[cdix] M. Gladwell, 2005

[cdx] H. A. Simon, 1987, p. 63

[cdxi] J. Peters, K. Hammond and D. Summers, 1974, p. 131; ibid., p. 131

[cdxii] D. Leonard and S. Straus, 1997, p. 113

[cdxiii] T. Gilovich, 1991, p. 9

[cdxiv] A. Dijksterhuis, M. W. Bos, L. F. Nordgren and R. B. van Baaren, 2006, p. 1007

[cdxv] A. Dijksterhuis, 2007, p. 32

[cdxvi] D. Leonard and S. Straus, 1997, p. 121

[cdxvii] H. A. Simon, 1987

[cdxviii] J. Kotter, 1999, p. 45

[cdxix] V. H. Vroom and P. W. Yetton, 1973

[cdxx] G. Yukl, 2010, p. 98

[cdxxi] D. Meehan and E. Arrick, 2004; C. Reinelt, P. Foster and S. Sullivan, 2002

[cdxxii] W. H. Drath, 1996

[cdxxiii] G. Yukl, 2010, p. 116

[cdxxiv] H. Mintzberg, 1983, p. 141

[cdxxv] L. M. Salamon, S. L. Geller and K. L. Mengel, 2010, p. 7

[cdxxvi] B. M. Staw, 1976

[cdxxvii] M. E. Porter, 1996, p. 70

[cdxxviii] Abbreviated from B. Hedley, 1977

[cdxxix] R. E. Gruber and M. Mohr, 1982, p. 17

[cdxxx] Adapted from I. C. MacMillan, 1983, pp. 65-68

[cdxxxi] Ibid., p. 68

[cdxxxii] H. A. Simon, 1987, p. 57

[cdxxxiii] D. Ulrich, S. Kerr and R. N. Ashkenas, 2002, p. 137

[cdxxxiv] B. Nanus, 1992

[cdxxxv] M. E. Porter, 1996, p. 70

[cdxxxvi] P. Brinckerhoff, 2000, p. 59 italics removed

[cdxxxvii] (Bryson, 1995, p. 139)

[cdxxxviii] V. Carucci, 2009

[cdxxxix] D. Hellriegel, 2009, p. 192

[cdxl] Ibid., p. 195

[cdxli] L. D. Goodstein, T. M. Nolan and J. W. Pfeiffer, 1993, p. 325

[cdxlii] L. Bossidy, R. Charan and C. Burck, 2002, p. 21

[cdxliii] M. J. Worth, 2009, p. 181

[cdxliv] L. Bossidy, R. Charan and C. Burck, 2002, pp. 227-228

[cdxlv] S. J. Wiener, A. D. Kirsch and M. T. McCormack, 2002, p. 64

[cdxlvi] D. Hellriegel, 2009, p. 195

[cdxlvii] J. M. Bryson, 1995, p. 139

[cdxlviii] M. Tushman, W. Newman and D. Nadler, 1988, p. 111

[cdxlix] G. T. Doran, 1981, p. 35

[cdl] R. Bauer, 2009

[cdli] D. Hellriegel, 2009, p. 195

[cdlii] Ibid., p. 195

[cdliii] Ibid., pp. 194-195

[cdliv] Ibid., p. 195

[cdlv] J. S. Livingston, 1969, p. 81

[cdlvi] D. A. Nadler and E. E. L. III, 2006

[cdlvii] D. Hellriegel, J. W. Slocum and R. W. Woodman, 1989, p. 408

[cdlviii] Ibid., p. 408

[cdlix] W. Thompson, 2010

[cdlx] L. M. Salamon, S. L. Geller and K. L. Mengel, 2010, p. 7

[cdlxi] W. G. Bowen, 2008, pp. 4-5

[cdlxii] T. Wolfred, M. Allison and J. Masaoka, 1999, p. 16

[cdlxiii] B. E. Taylor, R. P. Chait and T. P. Holland, 1996, p. 36

[cdlxiv] R. Chait, W. P. Ryan and B. E. Taylor, 2004, p. 11

[cdlxv] J. Carver, 1997, p. xviii

[cdlxvi] J. Carver, 2006, p. xiii

[cdlxvii] W. G. Bowen, 1994b, p. 1

[cdlxviii] J. C. Leifer and M. B. Glomb, 1995, p. 5

[cdlxix] Nonprofit governance index 2007, 2007, p. 4

[cdlxx] P. F. Drucker, 1998, p. 156

[cdlxxi] R. Chait, T. Holland and B. Taylor, 1996, pp. 1-2

[cdlxxii] R. Chait, W. P. Ryan and B. E. Taylor, 2004, p. 11

[cdlxxiii] W. G. Bowen, 1994b, p. 35

[cdlxxiv] K. N. Dayton, 2001, p. 4

[cdlxxv] Nonprofit governance index 2007, 2007, p. 4

[cdlxxvi] J. Peters and T. Wolfred, 2001, p. 3

[cdlxxvii] Ibid., p. 6

[cdlxxviii] R. Herman and D. Renz, 2000, pp. 157-158

[cdlxxix] Ibid., pp. 157-158

[cdlxxx] W. G. Bowen, 1994b, p. 2

[cdlxxxi] Nonprofit governance index 2007, 2007

[cdlxxxii] R. Moyers and K. Enright, 1997, p. 12

[cdlxxxiii] M. Middleton, 1987, p. 149

[cdlxxxiv] Ibid., p. 150

[cdlxxxv] Nonprofit governance index 2007, 2007, p. 4

[cdlxxxvi] J. R. Katzenbach and D. K. Smith, 1993, pp. 45-46

[cdlxxxvii] J. Masaoka, 2004b

[cdlxxxviii] Nonprofit governance index 2007, 2007

[cdlxxxix] Ibid.

[cdxc] L. Fredricks, 2006, p. xv

[cdxci] R. Moyers and K. Enright, 1997, p. 12; ibid; Nonprofit governance index 2007, 2007

[cdxcii] R. Moyers and K. Enright, 1997

[cdxciii] Ibid., p. 4; ibid.

[cdxciv] Nonprofit governance index 2007, 2007

[cdxcv] R. Moyers and K. Enright, 1997, p. 12; ibid.

[cdxcvi] J. Peters and T. Wolfred, 2001; Top position is one-time shot for many executive directors, 1999

[cdxcvii] J. Peters and T. Wolfred, 2001; Top position is one-time shot for many executive directors, 1999

[cdxcviii] A. Blackwood, K. Wing and T. Pollak, 2008

[cdxcix] S. J. Wiener, A. D. Kirsch and M. T. McCormack, 2002

[d] T. J. Tierney, 2006

[di] J. Peters and T. Wolfred, 2001, p. 13

[dii] W. G. Bowen, 1994b, p. 110

[diii] L. Brenner, 2008, p. 8

[div] J. Peters and T. Wolfred, 2001

[dv] A. Blackwood, K. Wing and T. Pollak, 2008

[dvi] United we stand: How to make your board work like a championship team, 2000, pp. 3-6

[dvii] C. E. Larson and F. M. J. LaFasto, 1989, pp. 33-34

[dviii] L. F. Seltzer, 2009

[dix] C. Crowe, 1998, p. 121

[dx] Ibid., p. 122

[dxi] Ibid., p. 122

[dxii] R. Herman and R. Heimovics, 1991; R. D. Herman and D. Heimovics, 2005

[dxiii] C. O. Houle, 1989, p. 88

[dxiv] Ibid., p. 89

[dxv] R. C. Andringa and T. W. Engstrom, 2001, pp. 4-5

[dxvi] Ibid., p. 4

[dxvii] Nonprofit governance index 2007, 2007, p. 4

[dxviii] Quoted in D. La Piana, 1998, p. 13

[dxix] R. C. Andringa and T. W. Engstrom, 1998, pp. 4-5

[dxx] P. Light, 2002b

[dxxi] C. E. Larson and F. M. J. LaFasto, 1989

[dxxii] Ibid., pp. 55-56

[dxxiii] Ibid., p. 108

[dxxiv] K. Mathiasen, 1999, p. 17

[dxxv] The sector's future depends on boards, 1996, p. 10

[dxxvi] R. T. Ingram, 2003 The 10 responsibilities of non-profit boards are as follows:

1. Determine the Organization’s mission and Purpose

2. Select the Chief Executive

3. Provide Proper Financial Oversight

4. Ensure Adequate Resources

5. Ensure Legal and Ethical Integrity and Maintain Accountability

6. Ensure Effective Organizational Planning

7. Recruit and Orient New Board Members and Assess Board Performance

8. Enhance the Organization’s Public Standing

9. Determine, Monitor, and Strengthen the Organization’s Programs and Services

10. 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 five, seven, and 10 are combinations of two responsibilities. Thus, there are 15 distinct responsibilities.

[dxxvii] BrainyQuote, 2001-2010

[dxxviii] J. Carver, 2006, p. 224

[dxxix] Nonprofit governance index 2007, 2007

[dxxx] Ibid.

[dxxxi] J. Carver, 2006, p. 264

[dxxxii] According the U. S. Census Bureau, Earnings in the Past 12 Months (In 2008 Inflation-Adjusted 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. ()

[dxxxiii] Nonprofit governance index 2007, 2007

[dxxxiv] Ibid.

[dxxxv] Ibid.

[dxxxvi] Ibid.

[dxxxvii] F. W. McFarlan, 1999, p. 74

[dxxxviii] Ibid., p. 74

[dxxxix] M. Light, 2004, p. xv

[dxl] F. W. McFarlan, 1999, p. 74

[dxli] Adapted from M. Light, 2004

[dxlii] Nonprofit governance index 2007, 2007

[dxliii] J. R. Hackman, 1990, p. 498

[dxliv] J. R. Katzenbach and D. K. Smith, 2003, pp. 139-144

[dxlv] B. Lawrence, O. Flynn and K. Fletcher, 2006, p. 20

[dxlvi] Nonprofit governance index 2007, 2007

[dxlvii] J. R. Katzenbach and D. K. Smith, 2003, pp. 85-86

[dxlviii] R. L. Gale, 2003, p. 5

[dxlix] The sector's future depends on boards, 1996, p. 10

[dl] C. E. Larson and F. M. J. LaFasto, 1989, pp. 133-134

[dli] J. C. Collins, 2005, p. 15

[dlii] F. W. McFarlan, 1999, p. 80

[dliii] J. R. Katzenbach and D. K. Smith, 2003, p. 48

[dliv] 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, 2003, p. 3

[dlv] The American heritage dictionary of the English language, 1996

[dlvi] J. Carver, 2006

[dlvii] R. D. Herman and D. Heimovics, 2005, p. 157

[dlviii] K. N. Dayton, 2001, p. 12

[dlix] R. Heimovics, R. Herman and C. Jurkiewicz, 1995

[dlx] R. Herman and R. Heimovics, 1991, p. 59

[dlxi] R. D. Herman and D. Heimovics, 2005, p. 156

[dlxii] J. C. Collins and J. I. Porras, 1994, p. 8

[dlxiii] C. E. Larson and F. M. J. LaFasto, 1989, p. 95

[dlxiv] “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.” B. R. Hopkins, 2003, p. 3

[dlxv] “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

[dlxvi] C. E. Larson and F. M. J. LaFasto, 1989, p. 134

[dlxvii] Quoted in J. A. Kay, 1995, p. 17

[dlxviii] J. B. Quinn, P. Anderson and S. Finkelstein, 1996, p. 75

[dlxix] J. Carver, 2006, p. 121

[dlxx] The standards of excellence, 2009

[dlxxi] Standards for Charity Accountability, 2003

[dlxxii] M. McCarty, 2003

[dlxxiii] BrainyQuote, 2001-2010

[dlxxiv] J. C. Collins, 2001, p. 36

[dlxxv] M. J. Worth, 2009, p. 115

[dlxxvi] M. Light, 2007, p. 87

[dlxxvii] Nonprofit governance index 2007, 2007

[dlxxviii] P. M. Jackson, 2006, p. 60

[dlxxix] Ibid.

[dlxxx] T. Holland and M. Blackmon, 2000, p. 7

[dlxxxi] C. O. Houle, 1989, p. xvi

[dlxxxii] BrainyQuote, 2001-2010

[dlxxxiii] A. Korngold, 2007a, p. 32

[dlxxxiv] A. Korngold, 2007b, p. 36

[dlxxxv] M. Buckingham and C. Coffman, 1999

[dlxxxvi] R. Herman and R. Heimovics, 1991, p. xiii

[dlxxxvii] R. D. Herman and D. Heimovics, 2005, p. 158

[dlxxxviii] J. Carver, 2006, p. 189

[dlxxxix] R. Chait, W. P. Ryan and B. E. Taylor, 2004, p. 93

[dxc] Ibid., p. 94

[dxci] Ibid., p. 94

[dxcii] R. D. Herman and D. Heimovics, 2005, p. 156

[dxciii] K. N. Dayton, 2001, p. 15

[dxciv] M. Light, 2001

[dxcv] M. Brassard and D. Ritter, 1994, p. 20

[dxcvi] Ibid., pp. 12-14

[dxcvii] N. H. Borden, 1964

[dxcviii] E. J. McCarthy, 1971

[dxcix] K. Majeska, 2001, p. 202

[dc] P. F. Drucker and J. C. Collins, 2008, p. 25

[dci] D. La Piana, 2008, p. 53

[dcii] P. Caesar and T. Baker, 2004, p. 214

[dciii] R. Kolker, 2010

[dciv] C. Leonard, 2010, p. A7

[dcv] P. Brinckerhoff, 2000, p. 61

[dcvi] K. Majeska, 2001, p. 223

[dcvii] K. L. Barker and D. W. Burdick, 1985, p. 994

[dcviii] M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009, p. 36

[dcix] Ibid., p. 37

[dcx] M. E. Porter, 1979

[dcxi] S. M. Oster, 1995

[dcxii] M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009, p. 60

[dcxiii] Ibid., p. 61

[dcxiv] C. Miller, 2001, p. 6

[dcxv] M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009, p. 78

[dcxvi] Ibid., p. 81

[dcxvii] Ibid., pp. 82-83

[dcxviii] C. Miller, 2001, p. 3

[dcxix] Ibid., p. 5

[dcxx] This discussion of diversification is informed by the work of Michael Hitt, Duane Ireland, and Robert Hoskisson M. A. Hitt, R. D. Ireland and R. E. Hoskisson, 2009

[dcxxi] M. A. Taylor, J. G. Dees and J. Emerson, 2002, p. 236

[dcxxii] For example, Leslie Crutchfield and Heather McLeod Grants’ Forces for good: The six practices of high-impact nonprofits 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” (L. R. Crutchfield and H. M. Grant, 2008, p. 27).

[dcxxiii] M. E. Porter, 1996, pp. 76-77

[dcxxiv] C. Miller, 2001, p. 6

[dcxxv] Effective capacity building in nonprofit organizations, 2001

[dcxxvi] Capital Structure, 2010

[dcxxvii] C. Miller, 2003, p. 1

[dcxxviii] Glossary, 2010

[dcxxix] A. Blackwood and T. Pollak, 2009, p. 2

[dcxxx] T. McLaughlin, 2001; T. A. McLaughlin, 2009

[dcxxxi] M. E. Porter, 1996, p. 62

[dcxxxii] D. Renz and R. Herman, 2004, p. 10

[dcxxxiii] N. Kleiman and N. Rosenbaum, 2007, p. 4

[dcxxxiv] Powering social change: Lessons on community wealth generation for nonprofit sustainability, 2003

[dcxxxv] W. Foster and J. Bradach, 2005, p. 96

[dcxxxvi] C. Massarsky and S. L. Beinhacker, 2002

[dcxxxvii] Ibid., p. 10

[dcxxxviii] Ibid., p. 10

[dcxxxix] W. Foster and J. Bradach, 2005; Social enterprise: Hype or Reality, 2005

[dcxl] J. Trexler, 2007

[dcxli] C. Miller, 2008a, p. 12

[dcxlii] W. Bielefeld, 1994, p. 19

[dcxliii] Social enterprise: Hype or Reality, 2005

[dcxliv] P. Brinckerhoff, 2000, p. 66

[dcxlv] B. Ross and C. Segal, 2009, pp. 57-58

[dcxlvi] K. Majeska, 2001, p. 213

[dcxlvii] Ibid., p. 214

[dcxlviii] P. Brinckerhoff, 2000, p. 74

[dcxlix] C. Lovelock, 2004, p. 46

[dcl] T. McLaughlin, 2001, pp. 252-253

[dcli] P. Brinckerhoff, 2000, p. 67 italics removed

[dclii] J. Kelly, C. Cook and D. Spitzer, 1999, p. 2

[dcliii] W. G. Bowen, 1994a

[dcliv] D. La Piana, 2006

[dclv] G. J. MacDonald, 2006

[dclvi] J. Masaoka, 2004a

[dclvii] T. Wallach, 2004

[dclviii] D. La Piana and M. Hayes, 2005, p. 28

[dclix] P. Brinckerhoff, 2000, p. 183

[dclx] Ibid., p. 176

[dclxi] P. Caesar and T. Baker, 2004, p. 221

[dclxii] S. Anthony, 2010

[dclxiii] BrainyQuote, 2001-2010

[dclxiv] P. Caesar and T. Baker, 2004, p. 207

[dclxv] Ibid., pp. 210-221 caps removed

[dclxvi] R. M. Kanter, 2006, pp. 75-78

[dclxvii] Nonprofit governance index 2007, 2007

[dclxviii] M. E. Porter, 1996

[dclxix] Quoted in J. Pfeffer and R. I. Sutton, 2006, p. 157

[dclxx] L. Bossidy, R. Charan and C. Burck, 2002, p. 15

[dclxxi] C. Massarsky and S. L. Beinhacker, 2002, p. 11

[dclxxii] A. Bhide, 1994, p. 152

[dclxxiii] J. Rooney, 2001, p. 274

[dclxxiv] A. Solas and A. M. Blumenthal, 2004, p. 131

[dclxxv] W. A. Sahlman, 1997, p. 98

[dclxxvi] P. Brinckerhoff, 2000, pp. 74-75 italics removed

[dclxxvii] Small business planner: Write a business plan, 2010

[dclxxviii] W. A. Sahlman, 1997, p. 98

[dclxxix] P. M. Senge, 1999, p. 6

[dclxxx] J. P. Kotter, 1995, p. 59

[dclxxxi] B. M. Bass and R. M. Stogdill, 1990, p. 289; G. Yukl, 2002, p. 274

[dclxxxii] D. Miller and P. H. Friesen, 1980, p. 591

[dclxxxiii] J. O'Toole, 1995, p. 253

[dclxxxiv] C. M. Christensen and M. Overdorf, 2000, p. 68

[dclxxxv] J. Pfeffer and R. I. Sutton, 2006, p. 167

[dclxxxvi] Ibid., p. 178

[dclxxxvii] Ibid., p. 179

[dclxxxviii] Ibid., p. 185

[dclxxxix] M. E. Porter, 1996, p. 70

[dcxc] D. Packard, D. Kirby and K. R. Lewis, 1995, p. 142

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PURPOSE

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