Tuesday, March 6, 2018

Organizational Purpose: Fixing the World

What would the world look like if the problem your organization exists to fix actually got fixed?

Every non-profit organization, every charitable organization, every NGO exists with the stated goal of eliminating some problem in the world. Eliminate hunger, poverty, war, cruelty to animals, cruelty to children, disease, and the list goes on. Hundreds, and maybe thousands, of organizations exist to eliminate some wrong, some evil, some injustice in this world.

This is good. There are many, maybe innumerable, wrongs, evils, and injustices in the world.

These organizations work hard. They raise money. They enlist volunteers. They recruit staff. They have passion and exhibit creativity. Sometimes they actually make inroads in pursuit of fixing the world.

This is good. The world needs fixed.

These organizations create, implement, and sustain programs to fix the problem the specific organization especially was created to fix. The programs benefit many people. The programs make life better for some. The really sophisticated organizations can prove it with "outcome data" they mine from their programs.

This is good. Problems do not fix themselves.

How often, however, does an organization stop and ask itself, "What is our purpose?" One might answer, "To fix the problem!" But fixing the problem is a goal, not a purpose. Goals are things one can list, and check off once accomplished. Purpose is bigger--purpose answers the question, "Why are we interested in the goal?"

Suppose my organization passes out food to hungry people who cannot obtain enough food through other means. The organization's stated goal might be to eliminate hunger in that city. This is a worthy goal. But if my organization asked itself, "Why are we interested in eliminating hunger in our city?" the answer might be something like this: "Because if hunger is eliminated in our city, that means that people have become self-sufficient and independent of the dependency machine!" This answer begs the question, "How does passing out food, for free, help people to become self-sufficient and independent?" We realize the goal and the purpose are actually at cross-purposes with one another. One of those two things has got to change or the organization will become more and more schizophrenic and dysfunctional.

Suppose my organization runs a pet shelter. The goal of the shelter is to rescue domestic animals and get them adopted. But suppose the organization also has a "no-kill" policy, and ends up spending more and more money on taking care of animals that are too sick, or too mean, or too whatever to have any hope of being adopted to the point where the main activity of the organization becomes taking care of animals that can never be adopted. If the organization asked itself, "What is our purpose," and the answer had to do with rescuing animals, then the goal should be restated. If the purpose answer emphasizes adoption, then the action of the organization in spending all its money on caring for rescued, but un-adoptable, animals is at variance with the stated purpose of the organization.

Every on-profit organization, every charitable organization, every NGO, must develop a purpose statement, and test everything the organization does against the purpose statement. Otherwise, the organization is or will become inconsistent, or schizophrenic, or dysfunctional, or otherwise come to a place where it will fail.

Develop a purpose statement, and rigorously test everything the organization does against the purpose statement. If there is a variance, something needs to give.

John Grundy
Warren, Ohio
March, 2018

Sunday, October 29, 2017


     In this series of blogs we examine issues common to non-profit and charitable organizations by considering a fictional charity. This is its story.

All About Students, Inc.

     All About Students, Inc. was founded in 1997 by Betty Flatstone. Betty saw that children in her neighborhood were getting into trouble after school because their parent(s) worked and the children came home to an empty house. She decided to create a program to give these children a place to go and things to do.

     At first she opened her home and worked by herself. Then she enlisted friends. The number of children involved in Betty’s program grew and it became clear to her that she needed a bigger space, money, and better organization. She sought the advice of friends and then a lawyer. She incorporated and filed an application with the IRS for the organization to be recognized as a charity. Friends served on the Board. She served as Chair of the Board and as the Executive Director. She filed grant applications, hired employees, and rented larger space.

     Board meetings were largely disorganized, with no “Board packet” or agenda distributed prior to meetings. Betty ran the board meetings and controlled matters brought before the Board. There was no planning of any kind discussed or done at any level for this organization. The Board had no independent will apart from the Executive Director.

     Over time, she saw that the children she served had other needs. She started a tutoring program. She started a nutrition program and provided meals, and food for the children to take home. She began a clothes closet for her program participants. Over time she saw that the families of these children had other needs and developed programs to address those. All About Students, Inc. opened a drug and alcohol treatment clinic, which included counseling, pharmaceutical treatments, and other medical and psychological services. The clinic provided services to program participants and members of their immediate families. Seeing that the need in the neighborhood for these services was great, the clinic expanded services over time to include anyone who came to the clinic, including folks covered by private and employer-provided insurance. The clinic generated a great positive cash flow and cash surplus.

     Over time, the clinic became the primary focus of All About Students, Inc., and many of All About Students, Inc.’s original programs lost attention and funding as the organization’s focus shifted. The Board was divided but Betty’s will always prevailed. She began to envision a string of drug and alcohol treatment clinics throughout the state and even across state lines. Board members resigned; volunteers in the original programs became angry; private donors began to withdraw support.

       A movement began in the Board to remove Betty as both a Board member and as Executive Director. Arguments broke out over who should succeed Betty, and what direction the organization should take. Emotions and tensions ran high, and the continued existence of the organization was in jeopardy. Members of the anti-Betty faction on the board have called a consultant to meet with them and help them sort out what to do.  

Thursday, August 11, 2016

The Role of the Board Member: Fiduciary Duty

In my last post, I discussed the function of the NPO Board, in general. In this post, I will address the role of a Board Member with specific reference to the Board Member's fiduciary duties.

Fiduciary Duty Legally, each Board Member has a fiduciary duty he/she owes the organization.  A "fiduciary" is a person who has a special relationship to others involving responsibility for property or duties which do not belong to the fiduciary. A good example is the trustee of a trust, who is responsible to manage the trust and its assets for the sole benefit of the beneficiaries and not for the benefit of the trustee. Similarly, in an NPO the Board Member is responsible to manage the organization for the benefit of those who are the clients or customers of the organization, and not for the benefit of the Board Member, the Board at large, the Executive Director, the staff, or any other person except the customers or clients of the organization.

There are several components to this. First, there is a financial component. Not only is there an ethical duty on the part of Board Members to see that the organization's finances are managed for the benefit of the organization's customers/clients, but there is a legal duty to do so. Charitable organizations that give a very large percentage of their funds to pay the salaries of the highest paid executives of the organization stand in danger of having the IRS revoke its recognition of the organization as a charitable organization. The Board Members must be the watchdogs of the organization's finances. This means they must demand, and receive, adequate financial information about the organization in order to determine that the organization is healthy financially, and that the organization's finances are being used wisely to accomplish the organization's goals. This also means that Board Members should be able to read and understand various financial statements presented by the organization's CFO or equivalent.

Second, there is an operational component. The Board Members must be able to determine what the organization is doing operationally, whether the programs are actually meeting customer/client needs, and whether the organization is using "best practices." If the Executive Director is doing a good job, the Board will be provided various reports on a regular basis demonstrating whether these objectives are being met. If the Board is not being provided such information, it is the responsibility of the Board to demand such information. There are a variety of possible sources of such information--a regular analysis of inputs and outcomes; employee and customer/client exit interviews; input from partners; and feedback from the community and funders are just a few of these sources. If the Executive Director is not providing adequate information for the Board to be able to determine if operations are working well, this is almost a sure sign of deeper problems.

Third, there is a leadership component. This involves such things as what kind of culture the organization has and whether it is a "good" culture; what kind of relationships exist between the executive staff and the line staff; whether someone is looking into the future of the industry in which the organization exists and the future of the organization in that context; and what the organization is doing with its partners, donors, and the community at large. If the entire focus of information the Board receives is "this is what we did in the last three months" then there is a problem. The Board itself does not have to provide leadership on a day-to-day basis, but it had better make sure the Executive Director does. In this aspect and others, the Executive Director is the agent of the Board to the organization.

Fourth, and this is implied in all the others, the Board must have a good relationship with the Executive Director; must be able to trust him or her; must see that the Executive Director speaks the will of the Board to the organization; and must see that the Executive Director provides leadership to the organization in all facets of the organization. It is not the role of Board Members to be buddies with the Executive Director--although friendship may exist. It is the role of the Board Members to be sure the Executive Director is leading the organization in the manner the Board demands.

There are other considerations involved in a Board Member's fiduciary duty to an NPO, but these demonstrate the seriousness of that duty. Board Members must be engaged with the organization in order to fulfill this duty. It takes time and commitment to do so, and it necessary to create and maintain a healthy organization.

Monday, August 8, 2016

NPO Procedures: The Board (Function)

The Board of an NPO is to exercise oversight of the organization--over its planning, policies, finances, operations, and management. In order to do this, Board members must be informed about each of these aspects of the organization, as well as its purpose, mission, and goals. There are components of a well-informed Board.

Orientation. The organization should present an orientation to all new Board members. The orientation should teach the new Board members about the purpose, mission and goals of the organization; should give an overview of the organization's staffing structure and programs; should tell the Board member what is expected of Board members; and should outline how the Board works. Typically, Boards have meetings at regular intervals (quarterly, for example). The Executive Director prepares and delivers a "Board packet," which Board members are expected to familiarize themselves with prior to the Board meeting. Orientation should also inform Board members if they are expected to be involved in fundraising events, strategic planning events, budget events, and other Board events.

Board meetings. Attendance at, and participation in, Board meetings are the single most consistent expectations and duties of Board members. A well-run organization will have an Executive Director that provides Board members with a "Board packet" well in advance of the meeting. The Board packet should include an agenda for the meeting and documents pertinent to each agenda item. For example, the current period financials, the language of proposed policies/policy changes, copies of the Executive Director's report and other reports, and other documents related to "action items" and "information items" in the agenda should be supplied to the Board members in the Board packet. Each Board member should review the Board packet prior to the meeting, and so be able to participate fully in the meeting.

Policies. A most important Board function is the adoption and maintenance of policies for the organization. The policies should be collected in a policy manual, or should be accessible on-line, for easy review by Board members. Board members should familiarize themselves with their organization's policies with an eye toward improving them if and as necessary.

Strategic planning; budgeting; and other planning functions. Board members should familiarize themselves with the organization's current budget, current strategic plan, and other current planning documents. When a particular planning process takes place (for example, budgeting should take place annually), the full Board should be involved. Some organizations are "Board driven," where the planning originates with Board members, is introduced to the Executive Director and other staff, and proceeds from there. Other organizations are staff driven, where the Executive Director and other staff originate a plan and then introduce it to the Board for participation and consideration. In either case, it is important that Board members participate fully in the process.

Oversight. Oversight means making sure the organization stays "on task," spends money correctly, has money to operate on, and is well run. Exercising oversight involves more than simple attendance at Board meetings, however. It should also involve financial and operational audit components; questioning of information presented to the Board, questioning the organization's relationship with its banks, clients/customers, partners, and other stakeholders, and being aware of the organization's reputation in the community. (This also includes being an ambassador for the organization in the community.) It is true that accountants will bankrupt an organization by cutting spending vital to the organization; it is just as true that staff will bankrupt an organization by adding program upon program. The Board acts as a sort of referee between the organization's finances and programs, to be certain the organization continues to exist to provide the best services it can given the resources it has.

While this post is not exhaustive, it does describe some of the function of the Board of a not-for-profit organization. If your organization needs assistance with its Board, contact Landy NPO Services, LLC.

Sunday, July 24, 2016

NPO Procedures: The Board (Selection)

Once a decision is made to form an organization to address a perceived societal need, the organization needs to be formed. One piece of formation is to found "the board." Every state requires that every non-profit corporation formed under that state's law must have a board. The number of board members, the title of the board members and the board itself differs from state to state, but for our purposes we will refer to the board members as "trustees" or "board members" and the board as "the board of trustees" or "the board."

The Board--Function. Often, the tendency is to enlist friends as board members.This is probably a mistake. To select trustees it is useful to know the function of the board. Once one knows what the board does it becomes easier to identify who should sit on the board. Here is a short list of some of the board's most important responsibilities.

1. Oversight. The overall purpose of the board is to provide oversight to the organization. This oversight is what I call "macro-management." The board sets the direction of the organization; determines whether the organization should pursue new opportunities; provides guidance and direction for the organization's programs and structure; and provides financial oversight. The board does not run the day-to-day operations of the organization, and does not micro-manage the organization. That is left to the Executive Director/CEO, who is really the board's agent appointed to run the day-to-day operations of the organization.

2. Budget. The Board determines the organization's budget and all that goes along with the budget--financial policies; budgeting policies and procedures; oversight of fundraising and grant writing; investment policies; oversight of cash and bank account management and policies; and so on. A good trustee can read a balance sheet, and income statement, has some expertise and/or experience in financial matters relating to an organization, and is fiscally responsible, aware, and proficient.

3. Policies. The Board adopts policies for the organization. These cover the full spectrum of the organization's front-line and back-office operations, including finance, HR, IT, client relations, planning, structure and governance, community relations, etc.

4. Executive Director/CEO ["ED"]. The Board hires, evaluates, directs and oversees the ED. Typically, the founder of an organization serves on the Board and serves as ED, but this is not the best practice and eventually will give way to separate ED and Board functions (in some cases, as late as when the ED retires). The ED is responsible to run the organization's day-to-day operations; the Board is responsible to oversee and direct the ED.

The Board--Selecting Trustees. From this short list of Board duties, it is clear that the board needs to have members who are proficient in a number of areas--finances, HR, IT, structure and governance, oversight, relationships, etc. It is not unusual to see board members who are bankers, accountants, lawyers, HR experts, IT experts, clergy, teachers/professors, managers, small business owners, and so on, so the duties of the board can be addressed by people who are familiar with those areas in their "day jobs." However, this cannot be the only criteria for recruiting board members.

A second, and just as important, criteria for a trustee is the commitment of the trustee to the purpose, mission, and programs of the organization. An accountant who is proficient at accounting but who does not care about the purpose, mission and programs of the organization will not be a productive board member, and will not contribute to the success of the board.

A "job description" for a trustee may be a useful tool to identify and recruit new board members. That job description should identify the purpose, mission and general programming of the organization as well as the expectations of a trustee. The organization's public relations pieces can also be useful to this end. A possible board member should be vetted not only for his or her familiarity with one or more areas of board function, but also for his/her level of familiarity with, and commitment to, the organization's purpose, mission and programs.

While this discussion is not comprehensive, it will be helpful to a new organization in identifying and recruiting the initial members of the board of trustees.

Monday, July 18, 2016

Lost Purpose and Violence in America

Where, today, is the politician, or the newscaster, or the social commentator, who is asking, "What is this all about? What is our purpose in America in 2016, on the eve of the presidential election?"

I have been absent a few days, preoccupied with the violence that grips our nation and the war of words between various groups set up to oppose each other. More terrorism in Orlando. More police officers involved in shooting black civilians. Civilians sniping at police. Protesters in Cleveland for the RNC. Donald and Hillary launching word bombs at each other. An ineffective President who seems to only preside at funerals of victims--lots of funerals for victims. On the world stage, a government in Syria apparently intent on eliminating those who are governed. Refugees in Jordan and Greece. Terrorist attacks in France and Turkey. Angry Britians kicking themselves out of the EU. A failed coup in Turkey.

There is little of peace, and little of hope, in the world. There is much anger, and violence, and death. Perhaps it has always been thus, but it does seem to be getting worse. There is plenty of finger-pointing and blame, of accusation and recrimination. Donald and Hillary promise to bring us to a better place by different, and much different, paths. But neither has any credibility; neither can be believed.

When I was a child, in grade school, we were taught that America was a place that was founded on the hope for a better life. "Finding a better life" was the reason people came here. That reason was fueled by recognition of America's purpose--to be a place that provided hope, and a chance. After the great influxes of immigrants through the early part of the the 20th century, the descendants of those immigrants carved out lives that were better than their forebears for the most part. We became comfortable, and "better" became "standard." "Standard" became not good enough and we felt somehow let down that our lives were not as golden as we thought they should be. We became disgruntled, and we looked for those who were responsible, to blame them.

Have you noticed that no one in America seems to be responsible for anything they do? There is always someone, or something, else to blame. The parents, or that there were no parents. The government. The employer. The "system." Lack of money. Lack of opportunity. Lack of resources. Lack of faith. Lack of support.

We have forgotten the purpose for the founding of America. "Hope" is based on a recognition that there is something bigger and better, and that bigger and better can be achieved with effort and work and perseverance. It is not based on a wish or a whim that someone will take care of me, or that I will win a lottery (real or figurative) and not have to worry the rest of my life. "A chance" is an opportunity, not a guarantee. Chances must be taken; they do not automatically deliver whatever it is that is being sought.

There is a great deal of noise in America today. People are shouting at each other so loudly they cannot hear one another. We would each be much better off to find a quiet place and ask ourselves, "What is my purpose?" in the context of being an American. Do not ask what it is owed to me, or why I have been cheated out of my dreams, or what can I get out of this. Do not ask what another's purpose is. If we were silent, and asked ourselves and then thought to answer honestly, each of us can contribute to re-establishing America as a place of hope and a chance.

Tuesday, July 12, 2016

Purpose Leads to Mission

Once purpose is determined, mission can be identified. Purpose is an umbrella; mission is what the umbrella is to cover. Mission must flow from purpose or it cannot be sustained. There must be congruence between the two. When one gives up on a mission and says, "My heart was not in it," that person speaks greater truth than they realize.

Mission is related, also, to addressing the environment--social, physical, geographic, economic, etc. If the purpose of a fictional organization, "Teaching Life Skills, Inc." is to help children improve their lives by teaching them life skills, the mission should be determined by considering the world around the organization and asking questions like: "What identifies children who can best benefit from being taught life skills?" "What life skills education is lacking among children?" "Why do some children lack knowledge of life skills?" "What number of children can we effectively teach life skills to?" "Do these children think they lack life skills and, if so, what life skills do these children believe they lack?"  In other words, identify an actual need in the target market. No organization is large enough to meet every need of every person. Limiting the organization's mission is a good way to manage the size, focus, and programming of the organization. This organization's mission might be, "To teach household management skills to adolescent boys ages 11 through 14 in the ___ neighborhood of [our town]."

A more commonly seen approach is backwards from this one. Will, Bill and Phil, local business owners, perceive that many neighborhood children seem to be hanging out and doing nothing productive. The children do not demonstrate [what our trio consider to be] proper respect for adults or for property of others, or to possess proper manners, or to be motivated to make themselves "better" people. They decide these children lack these kinds of life skills, it is important that they should possess them, and that Will, Bill and Phil can and should develop a program and begin an organization to teach these life skills to these children. They adopt a mission statement, "Making youth better through life skill training."  They develop a "life skills for boys" program, advertise it, and open the doors at the appointed time and place. A few young people show up, but fewer each week. After the fourth week the program closes and our trio say, "We gave up. Our hearts were just not in it."

The failure of this trio's project may have a hundred different causes, but one thing is clear: Will and company did not ask the right questions before developing the program. The first of those "right questions" would have been, "What is our purpose?" It is not clear, from the facts given, what their purpose might have been. It could have just been that, as business owners, they wanted to reduce loitering. It could have been that they believed every person should conform to some minimal standard in public settings; because these children did not, there must be some deficit that needed to be fixed. It could have been they were filling some need they had to feel superior to the neighborhood kids. It could be they did not like children at but felt societal pressure to "try to help these kids."

This story would be much different if Will and company had compassion for these children and, in interacting with them, learned that the children themselves felt a need to learn particular things about life so they could better manage their own lives. The Will and company purpose would have been to help these children for whom they had compassion. They would then have asked what these children needed, and fashioned a mission in response.

Mission follows purpose. If no purpose is identified, then there is nothing to which the mission is tied and it can drift, be ineffective, and ultimately fail.