The Limits of Virtual

By Steven Worth, President, Plexus Consulting LLC

In the early years (1990-93) when we were laying the framework for the global firm that Deloitte, Touche, Tohmatsu would later become I recall seeing the eye-popping travel expenses we were incurring as well as the reaction of senior management. Were these costs really necessary? Couldn't we invest a fraction of these expenses into audio-visual technology that would enable us to meet with our colleagues around the world real-time without ever leaving our offices?

Apart from the expense of travel, those who spend a good deal of time on the road know there is also considerable hassle and inconvenience associated with building your frequent flyer miles—so why not rely on video teleconferencing instead and leave the jet lag and travel delays to others? The idea found traction and Deloitte did invest considerable sums of money in teleconferencing technology and we did get great use out of it—but we also discovered its limitations.

Management groups that relied primarily on video teleconferencing to coordinate their activities found that over time certain hard-to-define frustrations often built up and that they needed periodic face-to-face meetings to clear things up. Within minutes of meeting face-to-face, misunderstandings and tensions disappeared like a morning fog with the sun. We came to conclude that as the social animals that human beings are, communication is not limited to the written or spoken word. We need face time as well.

We came to appreciate the difference between “high context” and “low context” cultures. The US, Canada and North-Western Europe are mostly low context cultures—that is, we don’t need to know people very well to feel comfortable doing business with them. We can and do sign contracts with people we have literally just met. But most of the rest of the world doesn't work this way. They are high context cultures who would never undertake any serious engagement with anyone without first developing a solid understanding of the person. They rely less on lawyers and contracts and more on personal trust based on family ties and friendships—which in turn are based on frequent, face-to-face contact. So we came to understand that if we wanted to work effectively in these cultures, we needed purposefully to get out of our offices and meet our clients and business associates face-to-face on their home turf.

Technology is critical, but it does have its limitations—as every family who has had a teenager texting at the dinner table knows…..

Lobbyist Registration Requirements—A Brief Overview

By Steven Worth

Regulating private sector influence over the democratic policymaking process is a constantly shifting landscape in the US as policymakers and public interest advocates seek to maintain the integrity of the process and limit the influence of money while not infringing on the Constitutional rights of citizens to make their views known to policymakers.  Rules are constantly being made and revised as gaps or unintended consequences become exposed (usually by the news media)—so even veteran lobbyists need to periodically re-read these regulations in order to be in compliance.  Penalties can be severe with financial fines and even prison time as punishment for those who make mistakes or who purposely ignore the law.

Most organizations and their employees that depend directly or indirectly on the government are not allowed to lobby or make political contributions at all.  Employers have strict restrictions on soliciting their employees to make political contributions.  And until a controversial Supreme Court ruling last year, there were absolute limits to the amount of financial contributions wealthy individuals and businesses could give political candidates.   

Mark Twain once noted that “mankind is the only one of the animal kingdom that blushes—or needs to.”  To that point, the best constraint on undue political influence on the democratic process is simple transparency—a requirement for lobbyists to list themselves publically according to whom they represent, what their purpose is, and how much they are getting paid to do that work.  This is how the European Union got started in regulating their lobbyists and is how the United Kingdom regulates itself.  In fact with this level of transparency in the UK, they even allow Members of Parliament to be paid lobbyists as long as their payments are publically disclosed.

Here are the links below to the four entities in the US Government that share responsibility for monitoring and regulating lobbying in this country.  FARA is run by the Department of Justice to monitor foreign money being spent in the US to influence public policy.  This was a program started just before the Second World War and is still in force today.
  
http://www.fara.gov/
 
http://lobbyingdisclosure.house.gov/
 
http://www.senate.gov/
 
http://www.fec.gov/disclosure.shtml
 
These are not perfect regulations but they have made the policymaking process in the US more transparent and somewhat more honest than it used to be.  I recall hearing stories of dinner parties hosted by lobbyists a generation ago where Members of Congress could expect to find hundred dollar bills under their dinner plates.  That sort of activity does not happen anymore.  While money still plays a huge role in politics, at least the common citizen is more aware now of who is being paid what, by whom, and for what purpose—and that does make a difference in determining how people vote and perhaps why.

The biggest conflict of interest remaining for Congress that has not been addressed to-date is their ability to buy stock in companies that are affected by their legislation.  In the private sector this would be considered “insider trading” and is illegal, but not so for the US Congress.

The Keys to Effective Communication

By Steven Worth, President, Plexus Consulting LLC

More often than not, membership organizations find their stakeholder communications to be a source of frustration for all concerned. Stakeholders complain they are not “getting the messages” sent to them even while those poor souls responsible for communications can document that they are sending out clear messages at machine gun frequency. So what is going on?

It is an old lesson—saying something is not the same as being heard. Communications occurs best when there is an innate understanding between the sender and the receiver. Among other things, the sender knows whom the message is intended to reach, why it should be of interest to them, as well as how and when best to reach them. And therein lies the catch—just because you feel the urge to say something, doesn't mean the person or people you want to speak to is going to hear you—or if they do, that your message will have the desired effect.

Carpenters have a saying that communicators would do well to heed: measure twice, cut once. Too often communicators feel that frequency and volume can compensate for ill- conceived messages that do not seem to be having their intended impact.

Content of course is important. Are those you are trying to communicate with interested in the subject matter? Ever notice how in a noisy room of people you suddenly notice when someone has mentioned your name on the other side of the room?—or that in a noisy theater someone suddenly gasping the word “Fire!” is heard by all? Personal interest tends to filter out the noise and to focus sharply on matters related to self-survival or simple vanity.

But the means and timing of communicating are also important. Using the telephone works, but not at dinner time or at 1:00 am if you ever want that person to take your call again! The print media—newspapers and magazines—used to be a good general way to reach large numbers of people, but people under the age of 30 tend not to rely on the print media for their information as much as previous generations. If you want to reach members of that generation the social media might be the better approach to take.

So yes, you probably can prove your audience has received the newsletters or emails you are sending them, but you may be deceiving yourself if you think they are getting your message. Spending the time and resources first to understand what your audiences want as well as when and how they want to hear from you will save you in time, effort, expense and frustration later!

What to do About Silos?

By Virgil Carter

You know silos. According to Wikipedia:  “A silo is a structure for storing bulk materials. Silos are used in agriculture to store grain (see grain elevators) or fermented feed known as silage. Silos are more commonly used for bulk storage of grain, coal, cement, carbon black, woodchips, food products and sawdust.”
In non-profit organizations silos tend to result from “vertically” structured business functions where each major business function—membership, education, publications, meetings, etc.—is a separate, stand-alone, fully self-contained business operation.  Silos are often the way small and start-up organizations organize early in their organizational life—by individual function.  Silos can be an efficient way for the conduct of limited, similar business operations. 

As organizations grow, however, silos may grow to reflect an inward focus by an organization--to prioritize and do the things that those in the silo “like to do”.  The longer an organization functions with silos, the greater the importance of the individual silo becomes to those working within it.  Soon, the importance of the silo may outweigh the importance of the overall organization, at least to those dwelling in the silo.

When this perception of the importance of an individual silo takes hold, it frequently doesn’t matter (to those in the silo) if there is a market for their products, or if operations are profitable.  Further, it’s not uncommon for there to be strong competition among silos for organizational resources—financial and human.  The result?  The more silos that an organization has, the more that internal competition may inhibit organizational responsiveness, performance and viability.  Am I right on this?

Is there an alternative for improved organizational performance?  Here it is folks:  market focus!  That’s it:  market focus.

Market focus means identifying the markets critical to organizational success as the basis for the development and sales of all of an organization’s goods and services.  This involves “the voice of the customer”:  learning and understanding the customer’s expectations and requirements, delighting customers and building loyalty.  This is a far cry from “producing what we like to produce” and trying to get someone to buy it.

This perspective of market focus can be a cultural and functional shift for non-profits where volunteers and staff in silos “do what they like to do”.  Market focus is an “external view”, as opposed to silo’s “internal view”.  Implementing market focus, using the voice of the customer, involves an annual process to assess and guide an organization’s portfolio of goods and services.  This means encouraging and supporting innovation for new programs; it means sunsetting some existing programs, in a planned, orderly basis.

Market focus means new opportunities.  New opportunities mean new revenues and resources, which will benefit all organizational members and customers.  Want to trade your silos for new opportunities?  Become market focused!

Things No One Will Tell You 3: CEO Performance Planning and Evaluation Methodologies

By Virgil Carter

What’s the best method for CEO annual performance planning and evaluation?  I suppose the answer is, “it depends!”  This is because every non-profit organization has its own unique culture, strategic and operating situation and personalities, which evolve and change over time.  Thus, there is really no “one size fits all” methodology.  That said, there are several major approaches for CEO annual performance planning and evaluation that may help to put in place what will best fit and work best for every organization and CEO.

Purpose

There is (or should be) a common purpose for performance planning and evaluation:  help the organization to improve each year by helping the CEO to improve annually.  It’s important to recognize the connection between successful organizational performance and successful CEO performance.  One doesn’t often happen without the other!   It’s usually the CEO, who leads the staff, and is responsible for the organization’s annual program planning, budgeting and execution.   It’s often the CEO who helps identify the strategic directions and priorities of the organization.  Thus, the CEO is a very valuable person for the organization’s success.  Volunteer leaders should understand the direct connection between organizational performance and CEO performance and, thus, be committed to helping support and improve CEO performance each year in a constructive and positive manner.

Methodologies

Each non-profit organization has its own special culture, it’s “life-style” and value system.  Annual CEO performance planning and evaluation should fit the organization’s culture.  The following table illustrates a range of association cultures or “life-styles” and the characteristics of CEO planning and evaluation systems which fit each culture.

It’s worth pointing out that the “ambiguous” category is in recognition of the situation where some associations attempt to use either a “generic” style of performance planning and evaluation that may have been handed down over time from within the organization, borrowed from another organization and/or attempts to fashion a planning and evaluation process which will represent a broad range of priorities and ideas, i.e., a smorgasbord!

Categories of Association Culture or “Life-Style”	Organizational Success—Basis for CEO Performance Planning	Metrics & Evaluations	Organizational “Fit”
Performance-oriented	CEO objectives focus primarily on organizational performance, i.e., strategic objectives, business operations, etc.	Performance-oriented measurements for strategic and/or business operations; programs & products often seen as operational means to strategic ends	Appropriate where organization puts priority of implementing strategy & successful business operations; innovation & change may be common
Maintenance-oriented	Annual objectives focus primarily on continuity & maintenance of status quo programs and products	Metrics for how well CEO maintains existing key programs & products seen as ends in and of themselves	Appropriate where operational predictability and consistency have priority; strategy is secondary; change is infrequent
Relationship-oriented	Annual objectives focus on forming & maintaining key relationships w/other organizations & individuals according to organization’s purpose	Metrics may be very difficult to identify or measure; may focus on “soft” data, i.e., “activity summaries”,  “committee reports” & personal commentaries	Appropriate where external relationships are critical for organizational purpose, i.e., umbrella, coalition, clearinghouse, cooperative & similar
Critical competencies-oriented	Annual objectives focus on the competencies key to the success of the overall organization and/or its specialized membership	Metrics may be tangible but elastic; may identify target goals, documented activities; measurements of business operations in direct support of competencies	Appropriate where organizational success is tied to critical competencies, i.e., resource & donor development, advocacy, etc.
Ambiguous	Annual objectives may either be undefined, or a “smorgasbord that attempts to combine objectives from various association cultures and personal priorities across an organization	Metrics may often be based on generic template; taken from some other organization; may reflect “one size fits all” perspective	Eventually unsatisfactory; frequently leads to a frustrating experience; typically results from lack of focus or lack of conscious attention

The table illustrates a wide range of association cultures or “life-styles” and attempts to show how different they may be when it comes to CEO performance planning and evaluation.  While many organizations may have elements of some (or all) of these cultures, when it comes to CEO performance planning and evaluation it really is important for the volunteer leaders and the CEO to reach common agreement on what is truly most important—what matters most when it comes to organizational performance.  Remember, the purpose of planning and evaluation:  helping the organization improve through helping the CEO to improve!

Things No One Will Tell You: 5 Critical Elements for CEO Performance Planning and Review

By Virgil Carter

Annual performance planning and related annual performance review of association CEOs is often a mysterious “black box” process for which little is known and even less is written.  As a result, the planning process and the review process may be very different in every organization.  In fact, these two processes may often be very different year to year, in the same organization, unless some education and discipline is applied to make planning and review positive and helpful year in, year out, regardless of changing personalities.  Here’s five critical elements which may help performance planning and review to be the constructive learning experience they should be.

Purpose of CEO Planning & Review:  There are a variety of reasons for CEO planning and review, which should be reflected in the annual process, including 1) achieving a clear strategic plan and supportive annual operational plan; 2) strengthening the CEO as one means of achieving organizationsl progress; 3) making the processes a professional and constructive process for all involved; 4) matching the organization’s culture and characteristics (there’s no “one size fits all” process for CEO planning and review)

Formalize and Document the Full Annual Process:  This element should address 1) a written policy that formalizes the purpose, process, schedule for common understanding and consistent annual commitment of all parties for a successful process; 2) written annual performance objectives and metrics prepared by the CEO and approved formally by the governing board; 3) written documentation of the results of each annual process with copies to the CEO

Recognize and Foster a Clear, Open Process:  In most non-profits, the only employee of the board is the CEO.  Everyone else is an employee of the CEO.  Therefore, a  clear, open process is needed to support and aid the CEO in achieving the mission of the organization.  This should include:  1) the CEO being a full participant in the planning, execution and assessment of the performance planning and evaluation process; 2) direct CEO communication opportunities with the board at every board meeting, keeping communications channels open and working.

Provide for Lessons Learned and Annual Improvement:  Performance planning and evaluation are like every other association function:  subject to lessons learned and the need for continual improvement.  Thus the process should:  1) work to build trust, honesty and mutual respect—teamwork should be stressed; 2) incorporate lessons learned and improvement into the process annually as mutually agreed.

Compensation Principles:  CEO compensation varies by type, size and location of the non-profit organization, as well as by the level of knowledge, experience and duties of the CEO.  Annual compensation should consider:   1) reliable association-based compensation studies for similar organizations and CEO roles; 2) both fixed and variable compensation, with the variable compensation, in most cases, being discretionary bonus programs, rather than the higher paying incentive programs common in industry; 3) CEO and staff annual compensation are not comparable to the compensation levels of association volunteers in their personal line of work—CEO and staff compensation are only comparable to their peers in similar non-profit organizations.

A couple of closing thoughts:  A non-profit CEO is not a “manager”!  The CEO is really a leader, thus the executive performance and evaluation should reflect the characteristics of leaders, i.e., vision and initiative, accountabilities, delegation/monitoring, outcomes, communications and relationships.

A subsequent article will explore various methodologies for CEO planning and evaluation.

Things No One Tells You: 5 Things to Always Get In Writing in Your CEO Agreement!

By Virgil R. Carter

Want to be a CEO?  Already a CEO, but switching jobs?  Here are five components of your employment agreement that are important to consider and that no one else may tell you:

1. Duties:  Are the roles, duties, title and authority of the CEO clearly stated?  Is it clear the CEO is singularly responsible for staff, budgets, contracts, and other essential annual business operations?  Can these be changed, and if so, by whom and how?  Are changes (change of duties, change of role, title or authority, reorganization, merger, acquisition, cessation of operations, etc) considered as termination for good reason (see termination below)?
2. Compensation, benefits & annual review:  What is the base compensation?  What are the types of variable compensation, e.g., bonus, commission, deferred compensation, etc.?  Are other types of compensation appropriate, e.g., one-time (moving, relocation, etc.) and/or recurring (car, travel, business club, etc)?  Will compensation be established and maintained as “market rate” and how will market rate be determined annually?  Does the association’s standard benefits package apply to the CEO?  Who participates in these annual recurring decisions?    How is annual performance planning and evaluation conducted?  Who leads the annual review process?  Who participates in the process?  Is the CEO annually at the mercy of only a single volunteer or a balanced group of senior volunteer leaders? 
3. Term & renewal:  Is there a reasonable initial term of employment?  When and how will the initial term be extended or renewed?  Is there annual compensation if employment is terminated before the initial term of employment has expired?  Who participates in these decisions?  What if there is no formal action to renew the term of employment—does it renew automatically, or is it considered involuntary termination?
4. Termination:  How will unfavorable “termination for cause” be defined?  How will other types of favorable termination (voluntary, involuntary and for good reason) be identified and defined?  How are the termination definitions linked to annual compensation, benefits and any special termination pay-outs, e.g., termination in first year of employment, termination prior to expiration of initial term or subsequent term of employment, involuntary termination, for good reason, etc.
5. Restrictions:  Are there personal or professional restrictions on the CEO while employed, and/or upon termination?  For example, can the CEO teach, write, do research or other similar activities, while employed?  Upon termination, can the CEO immediately work for another association in the same geographical area?  Can the CEO immediately approach employees of her/his former organization about career changes?

Thinking about these key parts of your CEO employment agreement, and reaching mutually agreeable resolution with your volunteer leaders will help to establish your credibility as a senior executive.  It will also make your life a lot more enjoyable, so consider these points before hiring and contract negotiations.  Good luck!

Aristotle on A Happy Life

By Virgil Carter

Is there really anything new under the sun?  Most non-profit organizations consist of a diverse and geographically dispersed of volunteers and staff, united in some common organizational purpose.  The Greek philosopher Aristotle wrote about the “Virtues” as a guide to living a “happy life”.  The more diverse a non-profit organization may be, the more important it is to have a “happy life”!

Author Deb Mills-Scofield, writes, “Look at your organization, your teams. You see people with a mix of traits; some are very courageous, others conservative; some live and breathe customer delight, others obsess with operational excellence. These are examples of the classic virtues — the Greek four of courage, justice, prudence and temperance, and the Christian three of faith, hope and love (or charity)”.

For successful organizational leadership and a “happy life” for an organization, here’s a brief summary of what Aristotle felt was important:

·         Courage:  It takes courage to challenge the status quo, to try something untried, to propose unprecedented solutions. Most disruptive innovations (products, services, supply chain, operations, management) take a lot of courage. Courage recognizes opportunity and leads change while managing risk (smart risk).

·         Faith:  Faith equals trust, which is based on our experience, on promises kept. It is increased with authenticity and honesty. It assumes worth (value) and worthiness (valuable) is aligned. Is Google’s market cap based on its computer servers and communication networks or on its algorithms, people, corporate culture and the belief, based on past experience, they will continue to produce worth, value.

·         Hope:  Hope is tied to faith. Hope looks ahead to the future and is rooted in facts, not fantasy. It balances the possible with the probable. Hope is based on experience, learning and application, so there must be freedom to fail. Learning from failure helps determine fact from fiction.

·         Justice:  Justice is the difference between fair and equal. Justice also applies the triple bottom line to innovate solutions that are meaningful and effective and preserve the environment — think of Patagonia, Toms of Maine, and Whole Foods. This directly affects your brand’s reputation.

·         Love:  Aristotle defined love in 3 ways: Eros (passion), Philos (friendship) and Agape (sacrifice, servant leadership). Think of “Voice of the Customer,” “Voice of the Employee,” and “Voice of the Community.” Passion is exhibited through excellent customer service (e.g., Zappos), social capital and servant leadership.  Love is all about creating and sustaining authentic customer value.

·         Prudence:  Prudence is about empowering people so the organization is agile and adaptable. This affects who and how you hire, train, develop and free your talent. It means you balance short, medium and long terms. It’s about assessing outcomes and outputs and can require courage. Prudence means your people know, and can impact, the processes and rules of the road and knowing “when to hold ‘em and when to fold ‘em.”

·         Temperance:  Temperance is Greek for “the middle way,” moderation, balancing competing interests. It applies to work-life fit, stakeholders, team’s diversity, policies for consistency but not constraint, long versus short term and accountability versus authority.

Your organization and teams may not have all of these virtues on an everyday basis, but hopefully it has (and uses) the virtues most critical for success of your various projects and activities.  If not, consider reviewing Aristotle’s ideas about the “Virtues”.  

For the complete article, go to http://smartblogs.com/leadership/2013/08/01/21st-century-leadership-learnings-from-2500-years-ago/

Money, Money, Money!

By Steven Worth, President, Plexus Consulting LLC

“Money, money, money, money, money….” (from “Cabaret,” the musical).   Many, if not most, of us consciously chose careers in the nonprofit and public service sectors

Many, if not most, of us consciously chose careers in the nonprofit and public service sectors because of their mission-driven focus to better the world, or at least that part of it that we are in. And in this context, the subject of money is often seen as antithetical to value-based organizations and causes many good nonprofit and public service executives visibly to cringe whenever the word is mentioned.

This is unfortunate—especially as for-profit companies, which are definitely driven by money, are increasingly eating nonprofit organizations’ lunches in markets such as education and professional credentialing that used to be the exclusive reserve of nonprofit organizations.

Money may be the “root of all evil” for religions, but it is a good and useful tool for managers who are interested in measuring the efficiencies and effectiveness of their programs and operations as well as the relevancy of any and all products and services that might otherwise be bundled and given away for free as “member benefits.”

This concept of money as a metric is a large part of what has driven nonprofits to become less dues and more non-dues focused over the past decade and is a major contributing cause to the nonprofit awakening that we are seeing (cf. A new study by Johns Hopkins University highlights new data from the Bureau of Labor Statistics that reveals surprising trends from nonprofit sector job growth. “Holding the Fort: Nonprofit Employment During a Decade of Turmoil” reports from 2000 to 2010 the nonprofit sector had an annual average job growth of 2.1 percent. Over the same period the for-profit sector had an average annual rate of minus 0.6 per).

So if you are a manager of a nonprofit and pride yourself on not giving a thought to money—you may want to reconsider—it may not be your personal motivator, but it is definitely your friend as a management tool.

The Overhead Myth

By Virgil Carter

Through a historic collaboration, The Better Business Bureau, GuideStar and Charity Navigator have distributed a "letter to donors," aimed at clarifying the "overhead myth" often used to assess performance of nonprofits when making donations.  Here’s the verbatim letter:

To the Donors of America:

We write to correct a misconception about what matters when deciding which charity to support.   The percent of charity expenses that go to administrative and fundraising costs—commonly referred to  as “overhead”—is a poor measure of a charity’s performance.

We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results. For years, each of our organizations has been working to increase the depth and breadth of the information we provide to donors in these areas so as to provide a much fuller picture of  a charity’s performance.

That is not to say that overhead has no role in ensuring charity accountability. At the extremes the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management.   In most cases, however, focusing on overhead without considering other critical dimensions of a charity’s financial and organizational performance does more damage than good. 

In fact, many charities should spend more on overhead. Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems—as well as their efforts to raise money so they can operate their programs. These expenses allow a charity to sustain itself (the way a family has to pay the electric bill) or to improve itself (the way a family might invest in college tuition).

When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve.  

If you don’t believe us—America’s three leading sources of information about charities, each used by millions of donors every year—see the back of this letter for research from other experts including Indiana University, the Urban Institute, the Bridgespan Group, and others that proves the point.

So when you are making your charitable giving decisions, please consider the whole picture. The people and communities served by charities don’t need low overhead, they need high performance.

Signed by the Presidents/CEOs of the BBB, GuideStar and  Charity Navigator, these thoughts should help all of us to better recognize the proper role of overhead and what is truly important in our volunteer contributions and organizations.

To see the original letter, go to bbb.org bbb.org 

It’s Still the Economy

By Virgil Carter

Have you noticed that the economy hasn’t been transformed into a positive, high-energy environment?  While we may not be in the depths of 2009, there is little to encourage optimism.  Non-profit organizations, dependent on dues revenues and non-dues income, continue to be under pressure.  The pressure may be from diverse sources:

•          Reduction in membership and membership dues
•          Shrinking base of non-dues income sources
•          Less available time for volunteer service to the non-profit
•      Pressure to cut staff and other operating expenses

Many associations, facing these pressures, continue to do what they have always done, drawing on reserve funds to offset the negative economy.  Other associations have seen the slow economy as a leadership opportunity; an opportunity to review and adjust their operations and value-added approach to business.

Opportunity for the Visionary

The challenging impacts of the prolonged economic slowdown actually offer an opportunity for the visionary.  This may be the very best time to re-assess legacy programs, products and services, identifying and prioritizing which ones most effectively support the organizational mission and provide essential capital for operations and reinvestments. 

Virtually all non-profit organizations have a host of long-term, legacy programs, products and services that hang on from year to year.  Experienced association staff know that major organizational change almost never takes place when times are good and members/money is rolling in.  For change to take place, it’s often the case that the pain of doing nothing has to outweigh the pain of change!.  Thus, when membership and revenues are decreasing, often becomes the ideal time to focus everyone’s attention and energy on important changes needed to meet a changed economy.

Change Leadership

Why do many organizations continue to do what they have always done, even during challenging economic times and even enduring negative annual financial performance?  Why is change leadership so difficult?  Harvard Business School professor John Kotter writes that the essential first step in organizatonal change is “to establish a sense of urgency” which is shared throughout the organization!  Even during emergencies, there is a normal human desire to hang onto the familiar and predictable.  Unfortunately, little in our changing world remains familiar and predictable for long.

Thus, our continued economic challenges are an opportunity for change leadership, where it may be most needed and beneficial.  Experienced and visionary volunteer and staff leaders will work together to critically review their organization’s performance,  communicate a sense of urgency about needed changes and put in motion the new vision and implementation steps which may be needed.

This “challenging” economy offers important opportunities for new organizational directions.  Let’s get cracking!

Comparisons: McKinsey Global Survey on Improving Board Governance

By Virgil Carter

Every organization, whether for-profit or non-profit, strives to achieve an effective governing board.  McKinsey & Company, a recognized leader in organizational management  in the for-profit corporate sector, often provides research useful for profit oriented and non-profit organizations alike.  In a recent 2012 survey, “Improving Board Governance:  McKinsey Global Survey Results”, McKinsey has some interesting findings which may be useful benchmarks for non-profit CEOs and volunteer leaders.

Survey contributors Chinta Bhagat, Martin Hirt and Conor Kehoe write, “Board directors today are more confident in their knowledge of the companies they serve and more strategic in their approach than they were in 2011. We asked respondents to focus on the single board with which they are most familiar. Overall, 166 respondents represent publicly owned businesses, and 606 represent privately owned firms; they represent the full range of regions, industries, and company sizes.

Focusing on Strategy

“Over 90 percent of respondents also say their boards have become more effective over the past five years, most often attributing that improvement to better collaboration with senior executives and more active or skilled independent directors”, according to the survey.
Two reasons may explain why boards are most effective at strategy: board members say they spend more time on it than other areas and that they have increased the amount of overall working time they devote to strategy, answering the call to action expressed by respondents to previous surveys. “In our 2008 survey, respondents reported that 24 percent of board time was spent on strategy—and a clear majority said they would increase the time spent.”  Now, directors say their boards spend 28 percent of their time on strategy, and only 52 percent say they would increase it (compared with 70 percent of respondents who said so in 2011). Meanwhile, the share of time spent on execution, investments, and M&A has shrunk, which is likely related to the fact that overall M&A activity has declined since 2007.

Room for Improvement

While respondents say their boards are taking more responsibility for strategy, risk management is still a weak spot—perhaps because boards (and companies) are increasingly complacent about risks, as we move further out from the 2008 financial crisis. This is the one issue where the share of directors reporting sufficient knowledge has not increased: 29 percent now say their boards have limited or no understanding of the risks their companies face. What’s more, they say their boards spend just 12 percent of their time on risk management, an even smaller share of time than two years ago.
Despite the progress they report, directors identify the same factors that would most likely improve board performance as respondents did in the previous survey: a better mix of skills or backgrounds, more time spent on company matters, and better people dynamics to enable constructive discussions. With respect to time, directors say they devote roughly the same number of days to board work as in 2011, and they still want more time. Across regions, directors at North American companies work an average of 22 days on company matters—notably less time than the 29 days and 34 days, respectively, reported by directors at European and Asian companies.

Looking ahead

• Increase attention to risks. According to respondents, most boards need to devote more attention to risk than they currently do. One way to get started is by embedding structured risk discussions into management processes throughout the organization.
• Make time. As in 2011, most directors say they want to spend more time on board work, and the results suggest real benefits from doing so: directors at higher-impact boards spend many more days per year on their work than everyone else, which likely helps them stay more relevant to and engaged with important company matters.
• Learn from peers. Directors at boards with less impact have much to learn from the actions taken by higher-impact boards, and not only when it comes to strategy. Using robust financial metrics, conducting postmortems of major projects, and using systematic processes to create competitive advantage through M&A—which the high-impact boards do more often—could all help boards become better.

How would you compare your non-profit governing board to these results?  Do you periodically survey your board for bench-marking and opportunities for governance improvement?  For a full copy of the survey findings, go to http://www.mckinsey.com/Insights/Strategy/Improving_board_governance_McKinsey_Global_Survey_results?cid=other-eml-alt-mip-mck-oth-1308

The Ideal Governance Model

By Steven Worth, President, Plexus Consulting LLC

Each organization tends to have that governance structure that reflects its values and culture. If having every voice at the table for every definable stakeholder group is what is most important to an organization then such groups tend to emphasize those traits while also accepting that the trade-off is to have process-intense decision-making governance structures that resist change. This perhaps marks one extreme of a spectrum.

The other extreme is represented by mission-driven organizations where the driving force lies in finding the means and strategies to advance the organization's mission. The people chosen to serve the governance structures of such organizations are chosen for this purpose alone. This is much more common to the governance structures of for-profit corporations than is it in the nonprofit world. The governance structures of these organizations tend to be lean, focused and fast-moving. The dangers in such structures are an increased risk of insider dealing and myopic decision making.

Somewhere in between lies the ideal governance-operational balance, but that spot is different for each organizational culture, I think. As a consultant I prefer the second model to the first because decision making is clearer and easier and these organizations do tend to adapt more easily to a fast-changing environment. But like the tortoise and the hare sometimes these lumbering, muscle-bound organizations in the first model tend to muddle through and end up winning the race after all!

Five Steps to Habit Change

By Virgil Carter

How many of us have habits we’d like to change?  Hold up your hands!  I’ve got my hand raised; how about you?  According to a recent article by Daniel Goldman, the brain’s basal ganglia plays a key role in the formations of habits, both good and bad.  What’s the basal ganglia I heard someone say?  The basal ganglia (or basal nuclei) are a group of nuclei of varied origin in the brains of vertebrates that act as a cohesive functional unit. They are situated at the base of the forebrain and are strongly connected with the cerebral cortex, thalamus and other brain areas.  If you don’t believe me, just Wiki it!  But I digress.

According to Mr. Goldman, “As we keep repeating a routine of any kind, the brain shifts its control of the habit from areas at the top of the brain to the basal ganglia at the bottom. As this switch occurs, we lose awareness of the habit and its triggers. The routine springs into action in response to a trigger we don’t notice, and does so automatically. We lose control.”

“To change the habit we must first bring it into consciousness again. That takes self-awareness, a fundamental of emotional intelligence.

Mr. Goldman writes, “This (idea of habits) came up at a workshop I gave with Tara Bennett-Goleman on her new book, Mind Whispering: A New Map to Freedom from Self-defeating Emotional Habits, which explains the neuroscience of habit change. She recommends mindfulness as a way to bring unconscious habits back into awareness where they can be changed. And she outlines a simple five-step process for making that change, especially helpful if the person is working with a coach.

1.   Familiarize yourself with the self-defeating habit. Get so you can recognize the routine as it starts, or begins to take over. This might be by noticing its typical thoughts or feelings, or how you start to act. You can also follow Paul Ekman's simple suggestion: keep a journal of your triggers.

2.   Be mindful. Monitor your behavior –thoughts, feelings, actions – from a neutral, “witness” awareness.

3.   Remember the alternatives – think of a better way to handle the situation.

4.   Choose something better – e.g., what you say or do that would be helpful instead of self-defeating.

5.   Do this at every naturally occurring opportunity.

Tara cites the neuroscience evidence that the more often you can repeat the new routine instead of the self-destructive one, the sooner it will replace the self-defeating habit in your basal ganglia. The better response will become your new default reaction.


To read the full article, go to http://www.linkedin.com/today/post/article/20130616203532-117825785-five-key-steps-to-habit-change

Aligning Volunteers and Staff

By Virgil Carter

Experienced non-profit CEOs and senior staff know that their job tenure may be rocky.  Tension, sometimes conflict, with volunteers and staff may be all too common.  When these situations occur they are not good for the organization or those involved.  What can be done to understand and minimize these situations?

Closer examination often reveals that active volunteers care passionately about the association.  Why else would they volunteer their time?  Many volunteers are leading figures in their field.  While many volunteers are subject-matter experts, many have little leadership experience in the unique setting of nonprofit, volunteer-led organizations.  In fact, many active volunteers may have little senior or executive leadership experience, since their work roles may be at mid-management or specialist levels.

By comparison, many CEOs and senior staff spend years expanding their enterprise-wide leadership and management knowledge of nonprofits. Many CEOs and senior staff gain perspective through active participation in the broader nonprofit world.

Thus we have a disparity:  volunteers without senior or executive management experience working directly with staff who may be functioning in senior or executive roles on a daily basis.  Compounding this disparity of knowledge and experience is the fact that roles and responsibilities of volunteer leaders and CEOs often are highly ambiguous. Even where there are written policies, there may be many more unwritten policies actually determining who does what, when, and how. Sound familiar?

What can be done to reconcile these disparities between volunteers and CEOs/senior staff?  One important improvement is forging and maintaining a volunteer-staff partnership built around leadership role clarity based on the following:

·         Mission-driven activities: These activities tend to represent the purpose of the organization. These activities motivate volunteers and are where most want to be active. These activities, which are rightly led and populated by volunteers, may produce few revenues and may be largely subsidized. This financial situation may be coupled with volunteer assertions that association activities shouldn’t produce revenues over expenses, to keep volunteer costs to a minimum.  Mission-driven activities are critical. There is nothing wrong with subsidized activities, so long as revenues from other sources are available for the needed subsidies.

·         Business operations activities: These activities are where most of the positive revenue is created to subsidize mission-driven activities. Because they are profit-and-loss oriented, they must be staff led and managed, since volunteers simply have neither the access nor the time to manage business affairs in the timely and agile manner required. A caution: business activities must be related to the mission, as much as subsidized activities.

·         Clear roles:  Establishing clear roles and accountabilities for these two categories of association activity enables volunteer leaders and CEOs to play to their respective strengths. Such clarity, coupled with good communications, enables effective leadership, improved relationships, and strengthened organizational performance.

Leadership role clarity is an important step to transform tension between volunteer leaders and CEOs into productive partnership. Annual and on-going volunteer and staff leadership orientations provide on-going opportunities to discuss and reinforce the importance of role clarity. 

The results—more effective volunteers, stability in CEO and senior staff tenure, and more successful, enjoyable association experiences—make the partnership worth everyone’s effort.

Litmus Test for Sustainability

By Steven Worth, President, Plexus Consulting LLC

It is a forehead slapping, frustrating moment when a manager realizes the metric they have been using to measure a program’s effectiveness may not be the right one--but it is the only explanation sometimes when hitting a target leaves you less than satisfied, when you realize that you could hit the target repeatedly and still never be any further ahead in the end. It is a more common managerial mistake than many realize, but how do you solve it—how do you know you have set the target on what truly matters?

The answer lies in the realization that every strategic goal has multiple dimensions such as:

• Financial, are the revenues generated enough to cover costs and contribute to investment in new intellectual capital?;

• In what measurable way(s) does it contribute to advancing the organization’s mission and vision? and

• In what measurable ways does it increased the market share or impact of your organization on your target markets?

But there is a fourth area that the most effective programs cover as well:

• How has this improved the economic performance of your customers?—how has it helped students find jobs, professionals to find better paying positions, and employers to operate more efficiently and profitably?

As important as the first three are, we have found that it is this fourth aspect of measurement that matters most in this competitive global economy we all live in.

Comparisons: McKinsey Global Survey on Improving Board Governance

By Virgil Carter

Every organization, whether for-profit or non-profit, strives to achieve an effective governing board.  McKinsey & Company, a recognized leader in organizational management in the for-profit corporate sector, often provides research useful for profit oriented and non-profit organizations alike.  In a recent 2012 survey, “Improving Board Governance:  McKinsey Global Survey Results”, McKinsey has some interesting findings which may be useful benchmarks for non-profit CEOs and volunteer leaders.

Survey contributors Chinta Bhagat, Martin Hirt and Conor Kehoe write, “Board directors today are more confident in their knowledge of the companies they serve and more strategic in their approach than they were in 2011. We asked respondents to focus on the single board with which they are most familiar. Overall, 166 respondents represent publicly owned businesses, and 606 represent privately owned firms; they represent the full range of regions, industries, and company sizes.

Focusing on Strategy

“Over 90 percent of respondents also say their boards have become more effective over the past five years, most often attributing that improvement to better collaboration with senior executives and more active or skilled independent directors”, according to the survey.
Two reasons may explain why boards are most effective at strategy: board members say they spend more time on it than other areas and that they have increased the amount of overall working time they devote to strategy, answering the call to action expressed by respondents to previous surveys. “In our 2008 survey, respondents reported that 24 percent of board time was spent on strategy—and a clear majority said they would increase the time spent.”  Now, directors say their boards spend 28 percent of their time on strategy, and only 52 percent say they would increase it (compared with 70 percent of respondents who said so in 2011). Meanwhile, the share of time spent on execution, investments, and M&A has shrunk, which is likely related to the fact that overall M&A activity has declined since 2007.

Room for Improvement

While respondents say their boards are taking more responsibility for strategy, risk management is still a weak spot—perhaps because boards (and companies) are increasingly complacent about risks, as we move further out from the 2008 financial crisis. This is the one issue where the share of directors reporting sufficient knowledge has not increased: 29 percent now say their boards have limited or no understanding of the risks their companies face. What’s more, they say their boards spend just 12 percent of their time on risk management, an even smaller share of time than two years ago.
Despite the progress they report, directors identify the same factors that would most likely improve board performance as respondents did in the previous survey: a better mix of skills or backgrounds, more time spent on company matters, and better people dynamics to enable constructive discussions. With respect to time, directors say they devote roughly the same number of days to board work as in 2011, and they still want more time. Across regions, directors at North American companies work an average of 22 days on company matters—notably less time than the 29 days and 34 days, respectively, reported by directors at European and Asian companies.

Looking ahead

• Increase attention to risks. According to respondents, most boards need to devote more attention to risk than they currently do. One way to get started is by embedding structured risk discussions into management processes throughout the organization.
• Make time. As in 2011, most directors say they want to spend more time on board work, and the results suggest real benefits from doing so: directors at higher-impact boards spend many more days per year on their work than everyone else, which likely helps them stay more relevant to and engaged with important company matters.
• Learn from peers. Directors at boards with less impact have much to learn from the actions taken by higher-impact boards, and not only when it comes to strategy. Using robust financial metrics, conducting postmortems of major projects, and using systematic processes to create competitive advantage through M&A—which the high-impact boards do more often—could all help boards become better.

How would you compare your non-profit governing board to these results?  Do you periodically survey your board for bench-marking and opportunities for governance improvement?  For a full copy of the survey findings, go to http://www.mckinsey.com/Insights/Strategy/Improving_board_governance_McKinsey_Global_Survey_results?cid=other-eml-alt-mip-mck-oth-1308

Aligning Mission and Money

By Virgil Carter

Despite the slow economy, some non-profit organizations are doing well.  Their membership and major programs, products and services continue to be successful.  Their financial performance continues with annual positive variances to their yearly budgets.

Many other non-profit organizations, however, have not been so fortunate.  Since the beginning of the economic downturn in 2009, the membership and major programs, products and services of these organizations have not performed as well as hoped.  Many of these organizations have experienced substantial reductions in membership, dues revenues and non-dues revenues.   The threat (or actuality) of negative financial performance has alarmed volunteer and staff leadership alike.  What can be done?

This situation is really about aligning mission and money.  When the economy and organizational performance are going well, there may often be little concern for the alignment of mission and money.  When things are going so well, however, the alignment of mission and money becomes much more critical for the prolonged health of the organization.  What should volunteer and staff leaders be doing to align mission and money?

One key approach to align mission and money is evaluation.  Annual evaluation of association programs, products and services serves to analyze and make decisions about existing and proposed programs, products and services to determine the degree to which each of these supports the organization’s mission and operational goals, including financial performance.  An on-going annual valuation process, tied into the organization’s annual budget process, providing a rational decision-making basis for existing and new programs—which programs deserve continuation, expansion, reduction or sun-setting.  This same review process also helps to identify and prioritize which of the new program proposals deserves resources for the coming year.

If your organization is facing challenging economic conditions this may be the ideal time to dust off and refresh your annual review of programs, products and services.  Are your mission and money aligned as needed to support your organization’s successful performance?