Demonstrating Donor Due Diligence

As a major donor to a large nonprofit charity or foundation, what due diligence do you perform to ensure the board leadership is making unbiased decisions as disinterested board members? If your answer is none, you are making poor investment judgments. Just as you would examine an investment prospectus, you should perform similar due diligence ensuring the board director's decisions are being made "at arm’s length." 

Especially during an executive search, directors may make decisions based upon their personal bias or connections, not solely on the ability and experience of the candidate who will best bring sustainability and move the organization forward.

As an "investor" in a nonprofit or foundation, ask for search committee and board minutes to examine their hiring policies, process and judgment. If the search committee is limited to too few members, lacks transparency, fails to include major donors, or other directors are told not to refer candidates, I would question the board’s process and lack of policy and transparency. If the evidence indicates any of these issues, at the least I would address these issues with the board - at the most I would immediately remove my investments.

As representatives of the public, 501(c)(3) corporation directors are ethically and morally bound to leave self-interest at the door, seeking only the interest of the organization, donors and those receiving public benefit. Your investments and your community deserve no less.

Assessing Proper Board Oversight Limits Culpability

This article by Eugene Fram, author of "Policy vs. Paper Clips" is a good overview of critical board roles in providing due diligence. Too many nonprofit boards don’t realize their culpability for CEO performance. Appropriate oversight will provide for proper monitoring and fully understanding organizational issues.

The board must recognize their responsibility as an independent arbiter of facts, without prejudice. It may be that the board's monitoring of the CEO is minimal or non-existent, which puts a level of onus on the board for an escalating issue. Sitting down with the CEO to gain insight and discover what support he or she needs should be the first step when any issue is brought to the board's attention.

Your board and your community (which you represent) are too deeply invested to allow for a lack of proper oversight sidelining your CEO – and potentially your organization’s mission and vision. Remember, your role with the CEO is a partnership!

As a nonprofit consultant, I'm particularly cognizant of the issues raised by this article. I've heard that among the membership of just one national nonprofit association, in the last year there have been about 12 member organizations that have gone through tumultuous leadership shifts, with this being the primary issue.

While the board must step in when appropriate, there must be policy and procedure in place that is closely followed. Only when serious ethical or fiduciary malfeasance is found should a board step in directly.

Developing, protecting, and reconciling the relationship with their sole employee, the CEO, is their primary job.

In light of these concerns, one of the first assessments I recommend is a board survey to highlight any governance and policy issues or disconnect with the CEO. In a majority of my cases so far there have been indicators of a need for board/CEO training in monitoring and policy creation. Every effort at deepening the relationship and trust with your CEO will pay dividends.

A Case for a New Leadership Paradigm

We are in a world of change as paradigms are being challenged. Gone are the days of the broad community acceptance of the Christian service provider. Postmodernism is taking its toll . . . leadership is changing, urban demographics are changing, legal regulations are changing, staff and boards are changing, donors are changing, and ministry core services are changing. Change is as certain as the sun rising.

In this day and age, faith-based service providers and their staff need to be on the cutting edge to keep up with an ever-changing environment that challenges the sustainability of the mission and vision of an organization. In order to meet these challenges there needs to be a constant – and two critical constants are proper stewardship and increasing core competencies through accreditation.

Stewardship of the organization, program curriculum, staff resources, liabilities, finances, and board governance are paramount – and most importantly, is stewardship of the physical and spiritual health of the leader.
Artios Institute provides collaborative accreditation through coursework designed with stewardship as the focus. Through a peer cohort of fellow leaders, development staff and board members, your knowledge, skills, and capacity for change is strengthened and profound impacts are cultivated. In this two-year course, meeting two and a half days every other month for the first year and three times the second year, we will explore four foundational pillars:

1. An Understanding of Biblical Stewardship, Fund Development & Advancement 
2. The Keys to Balanced Personal & Professional Growth of the Leader 
3. The Core Components of Building Boards & Effective Teams
4. The Role of Strategy in Determining Vision & Direction 

Whether you are a seasoned executive or development leader, or just starting in ministry, this course of study will challenge and strengthen you and your organization – and prepare both for the challenges of today and years to come. This is an investment in stewardship you can’t afford not to explore. Examine the course elements and consider Artios Institute for yourself and your team.

  Review the Four Pillars               Examine the CCNL Credential

PACS Need to Collaborate to Ensure Continuity

Along with the recent termination of the Long Beach Redevelopment Agency (LBRDA) by our benevolent state government, our four Project Area Committees (PACs) have been shut down. These citizen-led PACs were made up of property and business owners working together to assist in the guidance and revitalization of our local communities. By their very nature each focused on their sphere of influence – under the umbrella of, and receiving funding from, the LBRDA. Their desire for speaking into the process of community development does not end with the death of our RDA, however. Each area group is now actively taking steps to reconvene as independent bodies through incorporating as 501(c)(3)s, seeking funding, in order to continue to act in the best interest of their communities.

That is all well and good, until one examines the effort and costs of creating four different nonprofits, acquiring insurance, grant writing, and ultimately seeking funding from the same sources – in effect competing against each other toward the same goals. As a former Central PAC member, and having recently written a project paper on the need for nonprofits to collaborate in operations and back office administration, I have attempted to share with the leadership of these groups the wisdom of a joint venture. Utilizing an umbrella nonprofit with a collaborative board made up of leaders from each area, sharing costs of insurance and administration, and participating in bundled grant writing, would serve to multiply its collective political clout, decrease duplication, prevent dilution of funding streams, and reducing confusion for funders.

But that caution is falling on deaf ears, as these groups seem blindly committed to riding out as Lone Rangers, refusing even the basic collaboration that would serve to sustain them in the long haul. Their individual special interests are acting as blinders, hindering them from seeing the vast benefit of a joint venture. A potential cause is several of their leaders seem to have no interest in giving up the reins of their respective PACs, choosing rather to hold onto what power their titular positions afforded them. Lacking a collaborative central leadership and organization will make the process difficult and create more division than unity, confuse rather than coalesce, and weaken rather than strengthen their cause.

It would be in the best interest of the city for some existing entity to step forward to facilitate a more persuasive plan for an umbrella organization rather than allow a disjointed effort by these well-meaning, but misguided citizens. The future of community development in Long Beach may depend on it.

New Bylaws = New Soul?

Bylaws: A law or rule governing the internal affairs of an organization.

Tonight, the Association of Gospel Rescue Missions, of which I am a member (due to my position as president and CEO of a member Mission) voted to adopt a new set of Bylaws. This was a very difficult process for the current board and representatives who were called upon to deliberate this task with legal counsel. As this association is rather established and having bylaws that could be considered by some to be archaic – and not meeting current regulations – there was understandably some consternation toward this change.

For some, an intimate connection is made with founding documents; feelings are that they represent who the organization is – perhaps, even its soul – and by correlation, who they are as members. This is especially true of religious organizations, which AGRM is. Their operating procedures have been for the most part very similar to a church denomination, rather than a member association. Today’s laws regulating nonprofits require up to date bylaws and governing procedures. Updating the legal rules by which it governs itself does not necessarily change the heart and soul of the organization – that is, if the membership has chosen good leaders who believe in the mission of the organization.

For most nonprofits – unlike a church – having the full membership choose every board member, elect the officers, and rule on details of procedure and management is not appropriate. Given proper member representation on the board, the majority of issues of the general membership will be addressed. Rather than decreasing responsibility of the members, removing majority rule actually increases the responsibility of the individual members to be active, making one’s voice heard, and participating where needed to provide leadership and support on every level.

A more important element, I believe, is the matter of trust within the overall organization and toward its leaders. This relates to any body of polity with representative leadership. We as members of organizations must trust that those elected as leaders (or appointed by those elected) will provide due diligence, build consensus, and lead with integrity. The leadership deserves our trust, support and prayer.

“It is a trustworthy statement: if any (person) aspires to the office of overseer, it is a fine work he desires to do.” 1 Timothy 3:1