Parameters for efficient and effective organizational performance?

By Steven M. Worth, President at Plexus Consulting Group, LLC

Would having specific standards or performance benchmarks be helpful to professional and volunteer leaders of associations? Would such standards be helpful to potential donors in evaluating which organizations merit their time and financial support? If so, what do you think of the following as areas worthy of standards development?

Secure:
• Money handling procedures that minimize potential for embezzlement
• HR hiring and promotion processes that assure alignment of personnel resources with organizational purposes
• CEO versus average staff income ratio—what is optimal?
• Cybersecurity training and procedures in place
• Secure office space
• Audit committee processes in place

Purposeful:
• Fact-based, consensus driven strategic plan in place and promoted to all stakeholders
• Metrics identified to measure meaningful progress against strategic goals
• Strategic partnerships identified and utilized effectively to achieve shared vision
• Incentive plans in place that are effective and fair
• Has clearly stated code of ethics and means in place to enforce them

Sustainable:
• Has policies in place that ensure ecologically and environmentally sustainable practices
• Over 50% of income comes from sale of mission-driven products and services
• Has plans in place to expand market share
• Invests in R&D to ensure continued relevancy
• Has significant reserves to ensure stability but not so large as to hinder growth

Helping Your Board to Be More Effective - Five keys for high-level governance

By Virgil R. Carter

Despite the great diversity among non-profit organizations, we all seek effective governance by our boards.

A critical starting point is to recognize what a vital resource time is. Recruiting new board members is challenging because volunteers are concerned about drains on their time. Governing well is critical because a board’s time together is limited. Thus, how you and your board use your time matters.

Boards that are forward-looking, focused on strategy, provide the maximum effective (and enjoyable) leadership when time is limited. Strategic boards spend the majority of their time identifying broadly important outcomes, setting priorities, and monitoring the way the staff and other volunteers implement major initiatives.

Here are five steps volunteers may take for an effective, productive, and rewarding board.

1. Define success. Establish and practice a shared definition of organizational success. No matter how well an organization may perform in any 12-month period, if it can’t perform effectively year in and year out, it can’t really be called a successful organization. Thus, success has a lot to do with consistency and continuity over time.

2. Understand your core assets. Every organization has core assets. Typically they include: 1) knowledge, 2) community, and 3) advocacy. These are the resources for an organization’s accomplishment of its mission. Volunteers and staff must be strategically focused on the welfare of assets that cause members and customers to value the organization.

3. Think the unthinkable. Ours is a rapidly changing world in which we face unprecedented competition. To remain both up-to-date and competitive, focus on and prepare for the unthinkable—both opportunities and threats. Effective boards consider the one thing that would most revolutionize their organization and the one thing that would most jeopardize it. Thereafter, boards focus strategically to realize the opportunity and head off the threat.

4. Set priorities and monitor them. Resources are always finite—there are never enough. So develop strategic priorities and communicate what is truly important. To maintain a strategic perspective, boards must think in terms of what is important, not how to achieve results. The staff and others of the organization’s operational side are the ones to be held responsible for executing the action.

5. Establish a respectful staff partnership. The professional staff of an organization offer important resources—so important that it may be impossible for a board to be truly strategic without them. For example, staff members may have access to knowledge, contacts, and resources that may be unknown to a board. The staff is uniquely positioned to help develop and implement a definition of organizational success that’s built upon consistent performance, year after year.

Effective boards are both enjoyable and productive where it matters most: achieving the organization’s mission.

Listening Is Hard Work

Steven M. Worth

How many of us as children remember our parents pointing out that there was a reason we had two ears and only one mouth — could we please just listen? Apart from our parents wanting peace of mind, there is a lot of wisdom in this advice. But the temptation to follow one’s own ideas at the expense of what someone else may be trying to say does not stop in childhood. Many an association has followed strong leaders with more vision than wisdom down the wrong path, making mistakes that could have been avoided had more importance been placed on listening.

Do any of the following scenarios seem familiar?

• Mindful that his term of office was coming to a close, the chairman of the board of a major professional society pushed for his fellow board members to ignore market research findings which pointed to the need for the association to form strategic alliances with other associations in the industry as they developed and introduced a new professional certification. Such an ally-building process would be too time-consuming and would necessarily compromise his vision of what should be done.

• The board of directors of another association is persuaded that the time had come for the organization to merge with a much larger association. The association simply didn’t have the clout its members needed to have its voice heard in Washington. The association had no desire to survey its membership on this since the need seemed so obvious.

• Concerned about the motives of some of the members of his board of directors, an executive director of a large foundation took great care to select a strategic planning facilitator whom he knew and had confidence in. He wanted to assure that no policy initiatives were going to come out of this strategic planning exercise that he did not want.

In each of these examples either the board of directors or the executive director made a decision to limit outside influence in a predetermined policy direction. This decisiveness guaranteed speedy action — but was it in the right direction?

The association community across the country has never known greater turmoil. The number of associations being formed, merged, or downsized is at record levels. In such a highly charged environment decisive leadership is welcome. But it is also true that what one does not know can often prove fatal.

The distinguished British statesman Benjamin Disraeli once noted, "As a general rule, the most successful man in life is the man who has the best information…." The same is true for associations. But is it possible for an association to act decisively while still allowing for a thorough gathering of information? Some associations do. They do so by:

• Making time and resources available for thorough strategic planning on a regular basis. Market conditions are changing so rapidly that most associations now undertake strategic planning exercises once every two years.

• Starting the process with factual research into your members’ market — chances are you are sitting on the answers to key problems or opportunities. You just need to find them. Such research also lessens the degree of subjectivity that inevitably creeps into policy discussions.

• Limiting the instinct to "control." Use respected outside consultants who have a demonstrated understanding of your association to provide the objectivity that is needed — then let go. Know that you are only doing yourself and your association a disservice if you try to predetermine the results.

Of these three points, the last is without doubt the hardest. We all know associations are great lumbering things that require dynamic and focused individuals to get them to move in any direction. But sometimes these very leadership qualities interfere with the "listening" process that is needed if the right decisions are to be made.

The hardest part of association management is dealing with the many differing points of view, personalities, and interests that are involved in every association. This can be a frustrating experience for those coming from the military-like decision-making structures of most for-profit corporations. But there are two ways of viewing this flat decision-making environment: one is as an obstacle to overcome; the other is as an information-rich environment in which new opportunities and creative solutions to old problems are waiting to be discovered. The key is to foster a culture in which listening is valued.

It’s been said that President John F. Kennedy was such an avid and alert listener that it was exhausting to talk with him. Viewed in this light, listening is far from being a passive state. It is active, exhaustive, and methodical. And it might just be the key to your association’s future.

Financial Resources: Strength Through Diversity

Virgil R. Carter

Non-profit organizations need financial resources in order to achieve their mission. Non-profit finances are really simple-no money, no mission--it's that simple! For success, of course, non-profit organizations also need other essential resources--human resources and value-added knowledge resources, for example, which pertain to the field, discipline or industry of the non-profit. Non-profit organizations don't exist to make money, but successful financial operations are essential for non-profits to remain viable and successfully pursue their mission over time.

For many individual member and trade associations, annual revenue streams may result from one or two major sources--dues and non-dues revenues. Dues revenues come from new members who join and existing members who re-new their membership annually. Non-dues revenues may come from members and from non-member customers and supporters. Non-dues revenues are important for at least two reasons: 1) they enable financial diversity for associations, and 2) they provide additional resources for associations to address their mission in ways beyond that which is possible when revenues are solely from membership dues. Financial strength for non-profit organizations is obtained when there are diverse, dependable revenue sources.

There's an old association rule of thumb that says that associations whose dues revenues comprise more than 50% of their total revenue stream may be "cash poor" and may not have sufficient resources to address many of the needs of their members, customers and other constituencies. Organizations whose majority revenues are derived from member dues may live a "hand-to-mouth" annual existence, since new member recruitment and existing member renewal are frequently processes beyond the direct control of the organization. Who hasn't struggled to increase membership through increased recruitment and/or improved retention?

This "hand-to-mouth" financial condition is often typical of non-profit organizations whose annual revenues are under $1 million USD. On the other hand, non-profit organizations whose annual revenues are over $10 million USD may have annual revenues where membership dues may be in the 25%-30% range of total revenues. Many non-profit organizations find themselves somewhere in between these two examples, challenged to increase both dues revenues and non-dues revenues, striving for some reasonable financial balance between dependable dues and non-dues revenues.

Where do non-dues revenues come from? Sources of non-dues revenues may be from members, non-members and sponsors/advertisers who purchase goods and services from the non-profit, such as event registrations, product sales and fees for services and business opportunities, event sponsorships and the like. For many associations, non-dues revenues are developed from "traditional" meetings and conventions, trade shows, educational programming and advertising/publication sales. Other associations have found non-dues revenue opportunities in "innovative" global partnerships and programming, standards development, certification and credentialing programs and professional development/continuing professional education activities, etc. Grants, intellectual property and licensing also offer non-dues revenue opportunities for associations in the "knowledge-development" arena. The range of opportunity for non-dues revenues may be limited only by one's imagination.

Control over finances is the number one skill needed in association work, according to Critical Competencies of Association Executives, commissioned by ASAE and conducted by Lawrence Leiter & Company. Uncertain and challenging economic times are strong incentives for prudent non-profit organizations to seek to accomplish their mission through diversified revenue-producing activities, supplementing membership dues revenues with new and/or expanded non-dues revenues. Financial diversity is strength, especially when it comes to non-profit organizations. Does your organization have the strength of financial diversity?

Connections between Strategy and Operations

Virgil R. Carter

Most non-profit organizations have a strategic plan.  Virtually all of these organizations also have an annual operating budget.  Some organizations also develop and use an annual business or operational plan.  But what’s the connection among these?  How can you, your staff and volunteer leaders assess the connection between your strategy and annual operations?

The business press frequently hosts readable articles on the important connection between strategy and operations.  Although written for business, many topics are equally useful for non-profit organizations.  Colorful titles suggest the importance of the issue, including “Putting Leadership Back Into Strategy”, “Mastering the Management System”,  “Five Competitive Forces That Shape Strategy” and the compelling “Innovation Killers:  How Financial Tools Destroy Your Capacity to Do New Things”.  These topics are as common to the non-profit world as the for-profit world.

I have worked with the Balanced Scorecard (BSC) as a tool to identify strategy and successfully link it with operations, enabling an organization to successfully cascade strategy throughout the organization’s operations, using metrics and key initiatives.  One of the compelling concepts of the BSC is “balance”—a balanced approach for each organization.  Using the BSC, it is even possible to embed strategy in annual performance planning and evaluation for staff and volunteers. “Mastering the Management System” by Kaplan and Norton, the Harvard Business School professors who are the founders and developers of the Balanced Scorecard, is one important read for those looking for ways to better connect strategy with operations.

Here’s an important connection between strategy and operations:  “Successful strategy execution has two basic rules:  understand the management cycle that links strategy and operations, and know what tools to apply at each stage of the cycle”, write authors, Norton and Kaplan  

Want to improve the connections between your strategy and operations?  Think about your annual management cycle and how the various elements of your annual cycle can be best integrated with your overall strategy.  How can your annual budgeting cycle be linked to your strategy?  How can your business planning cycle be linked to your strategy?  How can you develop usable metrics and evaluations to assess your operations and the extent to which they support your organization’s strategy?  

Strategy for Unpredictable Times

Virgil Carter

A traditional approach for organizational strategy is based on the view that with sufficient analysis, organizations can make reasonable assumptions about their markets, financial and human resources, technology and customer services, and be successful.  Any unforeseen elements can be addressed through strategy adjustments every few years.  Said differently, strategy for many organizations may be based on internal decisions about what the external world looks like.

But what if the future is unpredictable?  What if an organization’s internal views and preferences just don’t align with the external environment in which the organization finds itself?

Author Lowell L. Bryan, in an article in a recent McKinsey Quarterly, “Just-in-time Strategy for a Turbulent World”, points out that “…globalization and technology are sweeping away the market and industry structures that have historically defined the nature of competition… (making it) impossible to predict, with any confidence, which markets a company will be serving or how its industry will be structured—even in a few years hence”.

Bryan suggests an alternative to traditional organizational strategy:  a “portfolio of initiatives” intended to achieve favorable outcomes for the entire enterprise”.  He writes “usually, these initiatives will be organized around themes focused on achieving particular aspirations, such as increasing the reach of the enterprise, entering a new but related industry, or achieving the greater efficiencies.  Portfolio effects increase the likelihood that some of these aspirations will be achieved even if many others fail”.

According to the author, a successful portfolio-of-initiatives strategy involves “creating enough initiatives offering high returns relative to the risks taken to enable a company to meet its aspirations and outperform the expectations of the markets.  The process requires the CEO and management team to “keep an open mind about where the company may be headed”.  Inherent in this approach is the understanding that “future decisions and future outcomes are likely to vary enormously from initial hypotheses”.  Bryan concludes his article by noting that “Most of the critical decisions involve subjective judgments that, unlike those generated by more deterministic strategies, will be informed by not just the highest-quality staff work but also the knowledge gained as time passes”.

Are you operating in unpredictable times?  Perhaps a portfolio-of-initiative strategy is for you!

The Sweat, Character and Hard Thinking Behind Success

 By Steven M. Worth President, Plexus Consulting Group, LLC

“There is a tide in the affairs of men.  Which, taken at the flood, leads on to fortune…” as Shakespeare noted nearly four hundred years ago; and this has been a popular theme throughout the ages in both popular fiction as well as, in recent years, business management books.  In his book Outliers, Malcolm Gladwell points out the interesting statistics behind most outstanding success stories.  His thesis is so compelling that one might be tempted to conclude that “success” is an odds game—the result of being in the right place at the right time and putting in the right amount of prep time—much like the Peter Seller’s movie “Being There” or the Tom Hanks movie ‘Forrest Gump” in which the leading characters of both movies achieve astounding success in life due to well-placed values and being in the right place at the right time.  Cinderella-tales are comforting.  We see justice rendered in otherwise hopeless situations—the way we rejoice in the news of jackpot lottery winners, imagining that with luck this might one day be us….

We see less of this magic in our work as management consultants.  What we see more often is the truism that successful people and organizations are those who do what the less successful don’t do.  By this I mean they do market research, they develop strategic partnerships with outside groups and organizations, they take calculated risks and encourage innovative thinking, they retire programs and organizational structures that have outlived their usefulness, and they focus their resources with laser-like intensity on those programs and projects that are designed to meet current and future market needs.  We also see the hard work, the agony of failure along with the courage to get up and go at it again, and the humility in knowing that no one can do it all or know it all and that success comes in working in harness with others who share your vision.

What we sometimes fail to see behind the news coverage and trappings of success are what Winston Churchill in another time called the “blood, toil, sweat and tears” of success.  This is unfortunate, because so many are ready to throw in the towel at the first sign of an obstacle.  The late psychiatrist and best-selling author Scott Peck noted in his book The Road Less Travelled that the majority of his patients were people who felt they were failures, or who built their lives around avoiding failure without realizing how much easier it would be if they just recognized that difficulty and uncertainty are not signs of failure but rather normal and expected challenges on the path of success.  

Strategic planning consists in part of recognizing which aspects of your environment you control and which represent external trends over which you have no control but which can present opportunities or threats that you should take into account in your planning processes.  As can be seen in our firm’s recent management survey, increasing numbers of managers are using strategic planning as a tool for planning their organization’s success—a tool that is only useful if it is fact-based and backed by a business plan that focuses resources and sets long term and short term measurable goals.  It works, but it does require work and risk and letting go of preconceived notions.  This is the furious peddling that goes on under the graceful swan’s seemingly effortless glide through the water.