Is Your Staff Being Quietly Bribed?

Character counts.

 

Yet, one of the disturbing trends the past two decades is the rise of blatant conflicts of interests in nonprofits.  This is more than just the outright fraud, but also the petty mutual relationships which enrich both parties.  Few people seem to understand the seriousness of what's happening.  One way to create a culture of cleanliness is by having a very clear Gift Policy.

 

My most vivid experience about the need for such came one Christmas during the 1980s in the office of an ExecDir of a Community Action agency. Since they acted as fiscal agent for numerous federal $$$ he had a number of subcontractors. His office was stacked with various 'holiday' gifts from various vendors. Some innocuous such as a fruit basket, but some like luxury box tickets to an NHL game. But it never crossed his mind nor that of the Board that this might set up a conflict of interest.

So YES, you do need a gift policy. The Board is the supreme fiduciary authority in the organization and is responsible for making sure all business is done in an ethical and transparent manner.

While corruption can kill a nonprofit, equally damaging can be the mere appearance of impropriety. Your image and reputation translate into community goodwill as well as cash...conflicts of interests put that at risk. Furthermore, if your ExecDir were to conspire to defraud the agency in collaboration with a vendor, one of the things your insurance company will look at is if you had policies in place governing the relationship. Insurance companies have denied claims for less.

Furthermore, if the ExecDir thinks it's OK, then other employees will act accordingly. Thus the vague ethical problems permeate the organization until one day something happens somewhere which winds up on the 6 O'clock news.

Here's one I helped a nonprofit draft back in 2005.  They had no stated policy, but they had an issue arise where the ExecDir was winter storing his camper and boat free of charge in a contractor's warehouse. It came out as part of a story about the contractor and severely embarrassed the organization. 

17. General Policy On Gifts To Any Representative of 'XYZ Nonprofit'

17.1 To avoid a conflict of interest, the appearance of a conflict of interest, or the need for our Board members and employees to examine the ethics of acceptance, XYZ Nonprofit Board members and employees do not accept gifts nor in-kind services in excess of $10 (ten dollars) from vendors, donors, volunteers, clients, suppliers, potential employees, potential vendors or suppliers, or any other individual or organization, under any circumstances.

17.2 Exceptions to this rule are limited to:

• Gifts of food, candy, flowers, etc which can be shared amongst all staff/volunteers. Such gifts must be placed in employee lounge and accessible to all.
• Such promotional items such as coffee mugs, pens, key chains, etc which vendors distribute to all clients as part of their general marketing.
• Invitations to meals at moderately priced restaurants (up to $25) for the purpose of discussing business matters related to XYZ Nonprofit.

17.3 When an invalid gift is received:

When Board member or staff receive a gift which violates this policy, such person shall notify their immediate supervisor and make arrangements to return the gift along with a brief note expressing appreciation for the thought, but that such gifts are not accepted under XYZ policy.

Some Tips For Building Energy On Your Nonprofit Board

As I've noticed repeatedly, Great Boards just don't happen....they're built with a little loving care and a lot of hard work. If we don't get the leadership question right, then the organization is at best mediocre.
Gail Perry has posted over on Guidestar a good set of tips for keeping your Board engaged. She notes that we all want enthusiastic, action-oriented board members who pay attention and get things done. But high-performing boards don't just happen. It takes time, clear focus, and careful strategies to get them there. Here are 10 tips for creating a board that can deliver.

1. Reawaken their passion.
   Board members often forget why they care—and even why they are serving. You'll get the most out of your board members if you can fan the flames of their passion for the cause. Asking them, "Why do you care?" creates amazingly powerful conversations that can open their hearts and evoke new energy.
2. Give them a great experience on the board.
   Look at it from the board members' perspective. They want something out of their own experience. They don't want a passive role. They want to have meaningful work and to see real results. And they want to have a good time doing it.
3. Have interesting, upbeat meetings dealing with big-picture issues.
   If all your board members are doing is attending boring meetings, then you are going to have a bored board. And a bored board is not going to be an action-oriented board. Don't give your high-level people low-level work. Don't waste their time.
4. Give them social time to meet other board members.
   Board members want to meet the other members. You can't create a sense of "team" without giving them time to get to know each other. Social time creates community and collegiality—and trust. Encouraging friendships among board members helps mold them into a team.
5. Focus board members on action items to accomplish, not on attending meetings.
   Do you want your board attending meetings or do you want them making things happen for you and your cause? Don't get me wrong—meetings can be important—but board members need to understand that their job includes more. They need to be in action as well.
6. Be clear about what you need them to do and when to do it.
   Board members tell me that they want clear direction from the staff. They want to know what to do and when to do it. If you can give them clear action items, then they can make it happen. Don't make them guess—give them a list and follow up cheerfully and often.
7. Focus them on friendmaking for the cause.
   Board members may be afraid of fundraising and "asking," but they are not nervous about making friends for the cause. Set them up to host tours, socials, coffees to learn about your cause. Show them how to spread the word about your great work in the world.
8. Encourage a positive attitude.
   Negativity will not change the world—it will drive people away. It's through positive, exciting vision that you can keep the flames of energy burning—and keep your group motivated. Great energy attracts people—and funding—to your cause.
9. Help them understand specifically what you are raising money for.
   Show your board members that you need $xx dollars to help xx kids after school (or xx students, or xx ballerinas—whatever your cause). You'll be amazed at their action when they have a clear target that will help a specific number of people.
10. Appreciate every effort they make.
    How often do you thank your board members? Please don't forget that they are just volunteers, trying to squeeze your cause into their already busy lives. Personal appreciation goes so very far—and helps keep them motivated and happy.

How To Think About Recruting Board Members

High performing Board members just don’t happen.  Truly transformative leaders just don’t fall from the sky.  Great Board members are identified, recruited and oriented.  In this piece, let’s discuss a basic question, “Who are you choosing to put on your Board?”

Sadly, haphazard Board recruitment is the rule rather than the exception.  Selection is not totally random, but Boards tend not to think about who would be a good Director until an opening appears, with the result that slots are filled by the best candidate willing and available at that time.

Part of the failure to recruit solid members starts by failure to identify what type of person belongs on the Board.  Many Boards do have a recruitment matrix to think through what type of technical skills (accounting, law, facility, etc).  Much of this thinking is then mirrored in the basic job description.

However, we often fail to target soft skills.  While everyone brings different strengths to the table, Great Board Members have at least one, if not several, of the following qualities.  When thinking about building a Great Board, consider who you choose.

Choose Strategic Thinkers

Great Board members identify new opportunities or unsolved problems, and can ignite the discussion about these issues.  They understand What Matters, both externally and internally.  They bring clarity to complex issues by presenting the issue so other Board members can grasp the issue and contribute to the solution.  Strategic thinkers have a mental model that connects today’s action with tomorrows outcome, the organization’s role within it, and an understanding of the competencies it requires.

Equally critical is that Strategic Thinkers do not wait for permission raise such issues.  They take initiative to organize people and time to start the discussion and drive the agenda.

Early last decade a small nonprofit afterschool program in Pittsburgh positioned itself to secure numerous grants and contracts to provide tutoring services.  They got ahead of the curve because several Board members, well versed in education policy, understood the opportunities of the federal No Child Left Behind. Within three years, the organization had tripled in size.

Choose Ambassadors

Ambassadors aren’t born, they’re groomed.  It is not enough to recruit well connected people and hope they’ll carry the message to their Rotary Club, Business Association or even their golfing buddies.  Nonprofits must help their Board members articulate the mission, the issues and the trends that affect the work. Being a good ambassador externally reverberates internally.

Junior Achievement of Western PA provides Board members with monthly policy updates and talking points printed on business card formats.   This gives Board members simple things to share in their routine discussions during the month.

Networking Matters

Choose Networkers

We have left the age of the Knowledge Worker and entered the age of the Networker.  It is not enough for Board members to know a lot about their mission, outcomes or field. Great Board members know enough about their own organization and the external environment to recognize opportunities. They then open doors or make critical introductions. 

As Malcolm Gladwell noted in The Tipping Point, networkers are the go-to people, the must-haves at meetings. The effects are viral. The more they connect the nonprofit to the external environment, the greater money, time and talent will flow into the nonprofit.

Choose Coaches

Great Board members know that pursuing the mission means accepting responsibility for results at all levels.  This means helping the entire organization achieve results even when it is not a direct responsibility.  This may involve showing up at a special event that's not required, or pitching in with ideas and information on another committee’s project.   It also entails helping to build the skills of fellow Board members. This type of Board leadership is essential in a flat, decentralized organization.

Understanding the fiscal position of a nonprofit can be a challenge for Board members not in the financial industry.  Therefore,  the Board of one nonprofit food bank in Utah recruits fiscal talent not on professional knowledge alone, but also on the ability to teach financial literacy to lay members of the Board.

Choose Commitment

Commitment is about quality, not quantity. A passion for the mission is essential in order to be a Great Board member.  Passion translates into a singular focus Board members exhibit when doing each piece of work for the nonprofit.  The nonprofit becomes a major priority in their life, and it shows by the investment of time, energy, ideas.  You can’t fake commitment.   

Many Boards incorporate the strategy of engaging people first as volunteers in events or on adhoc committees.  If in time they display passion for the mission and  enthusiasm for the organization they then are added to the pool of potential new Board members.

Great Boards are crafted.  It takes effort and attention to detail.  Recruitment is an ongoing process as potential new leaders are identified, nurtured and oriented.  But the investment of time and energy is critical to building an effective and sustainable nonprofit.

The qualities outlined here serve as signs of whether a person can be entrusted with major decisions and will contribute to advancing the mission. They show that the leader will take care of others and the organization

Self-dealing and nonprofit boards.....DON'T do it

Nonprofits are governed by the Non-Distribution Constraint .....meaning that board members cannot materially benefit from the operations of the organization. So do your conflict of interest policies explicitly state that Board Members cannot do business in any shape or form with the organization? Board Members can't be your landlord, they can't be your consultant they can't be your supplier.

I know some will say that there are legal exemptions....and there are. However, you're taking a gigantic risk. First, it's the appearance of impropriety , which is often worse than the act itself. Your reputation with the public matters. A small slip can cause lasting damage.



It's a GIANT Red Flag

Another reason is that it waves a red flag in the face of the IRS. With over 500 new agents involved in the nonprofit division they have a lot more resources to get into your business. Once you are on their radar you'll spend lots of time, energy and money dealing with them. Why give them a reason.
Finally, don't do it because it's just not right. Your Board members should be serving in order to help advance your mission. Business dealing change the nature of the relationship between the Board member and the organization. It also puts one on a slippery slope that can lead to more fraudulent activities.

Dear Board Member: Focus upon these responsibilities and you'll do well...

Lots of talk these days about what the Second Mile Board of Directors didn't do in fulfilling basic legal responsibility for governing the organization.The failure was catastrophic for the organization. I constantly tell Boards to keep your eye on the essentials.....these nine elements constitute what a Governing Board should bring laser focus to in their work together...

1. Ensure The Mission Is Still Relevant

What is the purpose of our organization…our reason for being?

2. Set The Strategy

How will we pursue our mission?

3. Hire, Supervise And Fire  The Executive Director

How do we demand excellence from our staff?

4. Monitor Outcomes

Are we effective?

5.Secure Resources

Find the money, people and partners we need in order  to pursue the mission.

6.Provide Financial Oversight

Ensure the resources are efficiently used.

7.Ensure Legality

Conduct oversight so that our organization conducts all our affairs in an ethical and legal manner.

8.Enhance The Brand

Network our organization to the outside community.

9.Develop The Leadership

Provide for the recruitment, orientation, mentoring and professional development of our fellow Board Members.

Firing The Executive Director.....how much do you tell the public?

Being volunteers, it is hard when a Board of Directors has to make the decision to fire an Executive Director.  But the real tricky part is how you explain it to the public.  Because most people don't like airing their dirty laundry in public, most cases are handled privately, with either 'no comment' or 'they left to spend more time with the family' type reasons provided.  This I believe to be extraordinarily misguided strategy.  If you are to keep the trust of donors, media and collaborators then transparency and openness is required.....even if it requires you to share exceedingly bad and embarrassing details about your nonprofit.

A case I've been following out of my old stomping grounds in Bozeman, Montana illustrates this point.  Following the abrupt 'resignation' of the Executive Director, the Board chose a policy to not discussing the issue in public.  Information vacuums are generally filled by innuendo, rumor and suspicon....which is what happened in this case.  "I can't believe I had to call and beg you to answer ourquestions," shouted one volunteer at a subsequnet meeting Board members held with their donors.  A fiasco ensued when the Board remained tight lipped and provided nothing but sterile bureacratic answers.

It will take years for Heart of The Valley Animal Shelter to recover...as well as leave lingering clouds over the career of former Executive Director Traci Weller.  Openness and transparency would have prevented this...

Finding a New Business Model

In many eyes they might not rank in importance with food banks, health clinics and other nonprofits, but symphony orchestras (many free standing nonprofits, others are quasi private/public partnerships) have been hemorrhaging money for decades as audiences get older. Some have been eating into their endowments every year in the past decade which leads managers looking to find a new business model. Top of that list would be restructuring the salaries of players, which has led to a series of strikes This story does have relevance as many smaller nonprofits have to find a new business model in order to survive the coming shake-out.

How To Think About Recruting Board Members

High performing Board members just don’t happen.  Truly transformative leaders just don’t fall from the sky.  Great Board members are identified, recruited and oriented.  In this piece, let’s discuss a basic question, “Who are you choosing to put on your Board?”

Sadly, haphazard Board recruitment is the rule rather than the exception.  Selection is not totally random, but Boards tend not to think about who would be a good Director until an opening appears, with the result that slots are filled by the best candidate willing and available at that time.

Part of the failure to recruit solid members starts by failure to identify what type of person belongs on the Board.  Many Boards do have a recruitment matrix to think through what type of technical skills (accounting, law, facility, etc).  Much of this thinking is then mirrored in the basic job description.

However, we often fail to target soft skills.  While everyone brings different strengths to the table, Great Board Members have at least one, if not several, of the following qualities.  When thinking about building a Great Board, consider who you choose.

Choose Strategic Thinkers

Great Board members identify new opportunities or unsolved problems, and can ignite the discussion about these issues.  They understand What Matters, both externally and internally.  They bring clarity to complex issues by presenting the issue so other Board members can grasp the issue and contribute to the solution.  Strategic thinkers have a mental model that connects today’s action with tomorrows outcome, the organization’s role within it, and an understanding of the competencies it requires.

Equally critical is that Strategic Thinkers do not wait for permission raise such issues.  They take initiative to organize people and time to start the discussion and drive the agenda.

 

Early last decade a small nonprofit afterschool program in Pittsburgh positioned itself to secure numerous grants and contracts to provide tutoring services.  They got ahead of the curve because several Board members, well versed in education policy, understood the opportunities of the federal No Child Left Behind. Within three years, the organization had tripled in size.

Choose Ambassadors

Ambassadors aren’t born, they’re groomed.  It is not enough to recruit well connected people and hope they’ll carry the message to their Rotary Club, Business Association or even their golfing buddies.  Nonprofits must help their Board members articulate the mission, the issues and the trends that affect the work. Being a good ambassador externally reverberates internally.

Junior Achievement of Western PA provides Board members with monthly policy updates and talking points printed on business card formats.   This gives Board members simple things to share in their routine discussions during the month.

Choose Networkers

We have left the age of the Knowledge Worker and entered the age of the Networker.  It is not enough for Board members to know a lot about their mission, outcomes or field. Great Board members know enough about their own organization and the external environment to recognize opportunities. They then open doors or make critical introductions. 

As Malcolm Gladwell noted in The Tipping Point, networkers are the go-to people, the must-haves at meetings. The effects are viral. The more they connect the nonprofit to the external environment, the greater money, time and talent will flow into the nonprofit.

Choose Coaches

Great Board members know that pursuing the mission means accepting responsibility for results at all levels.  This means helping the entire organization achieve results even when it is not a direct responsibility.  This may involve showing up at a special event that's not required, or pitching in with ideas and information on another committee’s project.   It also entails helping to build the skills of fellow Board members. This type of Board leadership is essential in a flat, decentralized organization.

Understanding the fiscal position of a nonprofit can be a challenge for Board members not in the financial industry.  Therefore,  the Board of one nonprofit food bank in Utah recruits fiscal talent not on professional knowledge alone, but also on the ability to teach financial literacy to lay members of the Board.  It's in the job description for Chair of the Finance Committee.

Choose Commitment

Commitment is about quality, not quantity. A passion for the mission is essential in order to be a Great Board member.  The nonprofit becomes a major priority in their life, and it shows by the investment of time, energy, ideas.  You can’t fake commitment.   

Many Boards incorporate the strategy of engaging people first as volunteers in events or on adhoc committees.  If in time they display passion for the mission and  enthusiasm for the organization they then are added to the pool of potential new Board members.

Great Boards are crafted.  It takes effort and attention to detail.  Recruitment is an ongoing process as potential new leaders are identified, nurtured and oriented.  But the investment of time and energy is critical to building an effective and sustainable nonprofit.

The qualities outlined here serve as signs of whether a person can be entrusted with major decisions and will contribute to advancing the mission. They show that the leader will take care of others and the organization

"Self Dealing" and Nonprofit Boards....a bigger problem than we care to admit

Nonprofits are governed by the Non-Distribution Constraint .....meaning that board members cannot materially benefit from the operations of the organization. So do your conflict of interest policies explicitly state that Board Members cannot do business in any shape or form with the organization? Board Members can't be your landlord, they can't be your consultant they can't be your supplier. 

I know some will say that there are legal exemptions....and there are. However, you're taking a gigantic risk. First, it's the appearance of impropriety , which is often worse than the act itself. Your reputation with the public matters. A small slip can cause lasting damage.

Another reason is that it waves a red flag in the face of the IRS. With over 500 new agents involved in the nonprofit division they have a lot more resources to get into your business. Once you are on their radar you'll spend lots of time, energy and money dealing with them. Why give them a reason.

Finally, don't do it because it's just not right. Your Board members should be serving in order to help advance your mission. Business dealing change the nature of the relationship between the Board member and the organization. It also puts one on a slippery slope that can lead to more fraudulent activities.