http://www.centerega.com/our-blog/rss.html description http://www.centerega.com/our-blog/post/are-non-profits-ripe-for-mergers-or-disbanding.html The lingering poor economy is wreaking havoc on the fundraising efforts of even the strongest non-profit organizations in communities all across the country. Numerous articles have addressed this issue. The purpose of this article is to address the potential for mergers or disbanding and to advocate a proactive approach within the community to take full advantage of all opportunities. Our organization, The Center for Ethics, Governance, and Accountability (CEGA) regularly speaks in support of proactive ethical and governance standards as mechanisms to promote effectiveness and highlight positive differences among organizations in the non-profit sector. The issue of merger or disbanding properly falls within our mission under the subject of accountability. Do we have too many non-profits operating in our community? Well, that depends on who you ask! Anecdotally, we suspect those within the non-profit sector would argue their organization should continue its existence; we suspect those outside of the non-profit sector would argue there is duplication of effort, lack of coordination, and too few charitable contributions to sustain all of the current organizations. We also suspect public opinion is not linked to need or performance, per se, but rather toward the perceptions of too much expense, not enough resources, and not enough results. Also, anecdotally, we are of the opinion that non-profits are generally not good communicators of the services they provide to the community. If true, poor communications fosters a lack of understanding and appreciation within the community. The vicious circle continues: donors do not support what they do not understand and appreciate. So, we believe the time is ideal for communities to take a hard look at disbanding certain non-profits and merging others. Every opportunity to improve performance should be explored. While this is hardly a unique idea, actually developing a process to fairly assess performance and need is politically difficult and socially taboo. However, starting with a realistic understanding of the difficulty is the best approach and should yield the most positive outcome. No cookie-cutter approach will work for all communities. We suggest that an important axiom be kept in mind: who says merging non-profits – or even disbanding several – is a bad thing to do?! Isn’t it entirely possible that selected reorganizations should actually better serve the community and strengthen currently weakened organizations? We definitely advocate a positive approach to any such community review. In keeping with the counsel we provide through CEGA, the best-case scenario would be for open-minded, forward-thinking boards of individual non-profits to actually conduct  an internal dialogue and to proactively offer their organization for merger in a strategic manner. This approach demonstrates leadership and takes as much emotion and fear out of the process as possible. It is difficult to argue with an organization who has reviewed its mission and purpose, analyzed its financial strength and its program outcomes, and decided it would better serve the community by merging, or combining forces, with another non-profit. Generally speaking, it is impossible to argue that economies of scale cannot be found through mergers and that efficiencies and improved service delivery would not be realized. We continue to believe that there is not now – nor may there ever be – any less need for community services, so continuity of employment by non-profits entering merger discussions should not be a negative issue. Is the time right for your non-profit to consider a major change? Have you thought about it? Have you discussed it with your fellow board members or your fellow staff members? If not, the opportunity is right for considering your options now. From the standpoint of accountability, it is your responsibility as a board member or an executive director to create the opportunity for this kind of dialogue in your organization.   http://www.centerega.com/our-blog/post/non-profit-tip-set-a-reminder-for-your-form-990-filing.html People with an interest in non-profit governance are aware that May 15, 2010 will be a sad day for thousands of non-profits who have forgotten to file their IRS Form 990 for the third straight year. (Actually, the problem date is May 17, 2010 since the 15th falls on a Saturday this year.) The purpose of this Non-Profit Tip is not to brief you on the details of the federal regulation that has resulted in this reality – you can do the research via the Internet – but, rather, the idea here is to give you a simple, easy-to-follow ‘fix’ that will keep you safe and sound – every year – on the filing deadline for your Form 990 filing. Tip: use whatever ‘reminder’ mechanism you have at your disposal to make a note of the annual due date for the filing of the 990 for your non-profit. If you use a pocket calendar, write it down! If you use Microsoft OUTLOOK, enter a reminder for the deadline! Calendars and reminder features come in so many forms that there is something out there for you, no matter what your technology preference. Even if your non-profit is large enough to have a staff member responsible for the 990 – or, even if you outsource the responsibility to a CPA – you must write it down! In the end, whether you are the executive director or the chair of the board, the ultimate responsibility for the filing of the ‘Number One Most Important IRS Document of the Year’ rests on YOUR shoulders! The IRS guideline is simple and easy to remember, so you can quickly set your reminder notice: the 990 is due every year on the 15th day of the 5th month following the end of your fiscal year. For calendar year-end accounting periods (December 31), the filing date is May 15 – the 5th month (May) and the 15th day (or the first business day after the 15th if it falls on a weekend like this year). If your accounting period is June 30, then it’s still the same rule: 5th month after the accounting period (November) and it’s still the 15th day. This is very straight-forward. There are options for two extension periods, but both still require that you request the extension (i.e. take action) by the original filing date. Because our organization – CEGA – believes in the importance of ethics, governance, and accountability as a proactive tool to enhance the image of non-profit organizations, let me offer a reminder of the importance of filing your 990 on time. Remember that your non-profit status (as a tax exempt, charitable organization serving your community) is a privilege granted by the IRS. In lieu of paying taxes and filing say, a Form 1040 (like you file for your personal income taxes), your non-profit is required to file, annually, a Form 990. It’s the law. And, it’s your responsibility. While everybody knows April 15th is the magic deadline for your personal taxes, the non-profits have varying deadlines related to their year-end accounting periods, which makes forgetting all too easy. The recent news stories tell us that thousands of non-profits will lose their status because they have forgotten to file their 990 for three years in a row. Three years?! Good grief!! I would submit that they deserve to lose that status: they failed to live up to their end of the bargain. And, again, in keeping with our recommendations at CEGA, wouldn’t you prefer that your non-profit be known as one who lived up to its responsibilities and did NOT forget to file? Doesn’t that say a lot about who you are? Be proactive. Don’t trust your memory. Don’t rely on anybody else. Follow our tip: set a reminder – do it right now – for next year. I assure you that you – and your stakeholders – will be glad (and very proud) that you did. http://www.centerega.com/our-blog/post/non-profit-strategies-wall-street-vs-main-street.html http://www.centerega.com/our-blog/post/non-profit-strategies-know-when-to-walk-away.html Good articles need to inspire you to think, question, and take action. It is my hope that this article can be one of those. Throughout my article series over the past couple of years, I have sought to give advice and encouragement to nonprofit organizations and their leaders about the important role they play in our communities. Nothing about my commitment to that effort has changed. However, today it has struck me that there is a ‘reckoning’ that all of us must ultimately address: is it time to walk away? That is the question. And, it must be framed as different from quitting – anybody can do that – and, walking away must be seen as different from walking away mad. With purpose and appropriate discernment, how do you know when it is time to walk away? This article is devoted to laying the groundwork for you to explore this challenging – and oft ignored – issue. I would invite you to spend some quality time pondering this issue and, importantly, to share your thoughts with other readers. By creating a dialogue, you have an opportunity to harness the power of the written word and utilize the Internet to share your thoughts with others. I’ve been thinking about this particular issue for years and discussing my opinions with people in dozens of meetings, but I always wanted to share my thoughts in writing. Yet I refrained. A recent piece of state legislation caught my eye and has helped push me to write this article. Believe it or not, a state code (it does not matter which state) was recently amended to allow a non-profit to set aside mandated term limits for certain board members. I read the amendment, was frankly surprised at the wording (while intentionally not a quote, the above paraphrase is extremely close!), did some research, thought about the issue for a few days, talked to several people, and I still cannot find any well-reasoned justification for ever needing such legislation. In fact, I feel very strongly that term limits on a non-profit board are healthy. But, term limits could be the subject of another article. This article is about knowing when it is time to walk away. Obviously, the board that sought this state code change has a very different mindset for running its operation. It’s no secret that I believe the non-profit sector holds tremendous potential for solving a myriad of community challenges. I believe that sentiment is truer now than ever before. Just this past week, in an hour-long telephone conversation with a trusted colleague about a non-profit gone bad, I asserted my standard non-profit governance observation: where is the board and, more specifically, is there no true leadership on the board that can address the problems that have been identified? Sure, executive directors can act up, make mistakes, upset folks – so can board members and even the constituents they serve – but, at the end of the day, the board runs the organization, so I always ask: where is the leadership? I suggest that, try as you might, you cannot get around the importance of the key governance issue of leadership. I have observed over the years that true leadership on a non-profit is often in very short supply. Sometimes it does not exist at all. It saddens me; it concerns me; and, it often makes me irritable. I fear that too many board members want to feel good about their board service without investing the time and energy required to make a true difference. Come to the meeting (or not?), listen to what is said (maybe?), seek to understand the issues (really?), and be willing to offer genuine opinions, advice, and suggestions as to how to improve the organization (rarely?). In my opinion, a board member needs to work hard if he or she wants to feel good – and, the ‘feel good’ needs to be motivated from within, not without (as in seeking admiration from others for the board position they hold). Albeit anecdotal, my experience leads me to guess that 90% of non-profit board members are unqualified to serve and they make no genuine effort to engage. Everybody seems to want to feel good without doing the work. Maybe this article is more about what to do if you are among the proverbial 10%, have done your best, moved things forward as far as you can, and need to make an informed decision about your own best interests and your future role. Yeah, maybe that’s the way to think about this issue. If, and I do stress IF, you are an enlightened board member and have done all you can, then you will recognize that you are nothing magic, or special, or required. This article is intentionally written to the person who is at peace with themselves – and, knows who and what they are not. We are not talking about making a decision based on pride but, rather, based on what is right. A lot is being written right now – current day – about non-profits and the surrounding governance issues that are being raised. Examples include the de-funding of ACORN, the questionable spending practices of Feed the Children, and the high executive salaries at the national headquarters of Boys and Girls Clubs, just to name a few and make a point. So, I would suggest that non-profit governance is clearly an important and timely topic. Let’s make this very personal: it’s about you; it’s about me; it’s about all of us. As you analyze the issues surrounding your own particular situation, you will find there are only a few categories: (1) you have messed up in some gigantic way and a wrong should be corrected; (2) you have incorrectly been accused and there is nothing that needs to be righted; (3) you have neither messed up, nor been accused, but your best efforts are increasingly falling on deaf ears and you question your ability to make any further positive contribution. Doesn’t this pretty well sum up your possible categories? This article is NOT about either of the first two categories. If you have messed up, then endeavor to fix it; maybe you can – but maybe you cannot – and your decision to walk away will be revealed as you work through the process. If you have been wrongly accused, then either speak up about it or let it ride – whichever way works best for you – and you can walk away or stay at the table, whichever you choose. The biggest challenge, in my opinion, is determining when your role is no longer relevant. The key word here is relevant. Have you ever had somebody look to you for leadership, count on you to do the right thing and, when you do, that same somebody is unhappy because you did not do what they wanted you to do? Have you had experiences relevant to the discussion at hand, been brave enough to share them, only to have folks think you are trying to show off your knowledge and dismiss your thoughts without even giving you an opportunity for meaningful discussion? How does that make you feel? What if that seems to be happening over and over again – i.e. it’s not an isolated incident and you’ve consulted trusted advisors to make sure you are not being overly sensitive or paranoid? What if you are a past chair of the board, filled with knowledge of the organization (its good things and its bad things), and are genuinely trying to help the current leadership avoid the same mistakes of the past, but you are thought of among your fellow board members as ‘out of touch’ and living in the past? What if the organization gets itself in genuine trouble over an issue that you tried to counsel it to address differently, and you had the grace to keep your mouth shut when you were ridiculed and outvoted, but now everybody wants you to solve the problem? Ask yourself: is your organization currently relevant and is your board service currently relevant? Is it time to walk away? This is a good place to insert a disclaimer. I do not advocate running away! Walking away is the issue here – never running away. If there are issues which need to be resolved and if there are opportunities for legitimate service, then I do not suggest walking away. I believe that you should not walk away until the circumstances have been made right – and, for better or worse – only you can know when that time has arrived. This is not about being ‘holier than thou’ – nor is it about being selfish or uncaring – but neither is it about being untrue to yourself and your beliefs. It is about doing the right thing at the right time for the right reasons. Your thing; your time; your reasons. It may even be considered to be the ultimate act of leadership that you can demonstrate – both to yourself and others. And, almost certainly, it will not be understood by many people. That is precisely the point. It is also the challenge. Let me provide an example. For those of you who have followed my previous articles, you know that I like to call these ‘case studies’ because the truth of the matter is that an actual example is always more instructional than anything I could possibly make up. I believe that we can learn a lot by studying examples. As it turns out, this example is about an experience I had – which I could have chosen to disguise in some third-person manner – but I have decided not to bother. One of the first leadership opportunities that came my way as a young professional was to serve as president of a community service organization. I would like to think that I had worked hard on various projects over the years and risen to the leadership position because I had genuinely earned it. Who knows? It does not matter. The position was elected by the entire membership, so arguably the majority of the members thought I was worthy (at least at some point in time). Following my year as president, as was the custom, the immediate past president became chair of the board. I should mention this was an all-volunteer organization and there was no executive director, although we did employ a secretary to assist with administrative matters. She was sort of a ‘den mother’ or ‘fraternity mother’ – wise beyond the sum total of all of us members. Chair of this board was purely an honorary position – ostensibly an attempt to keep some continuity at the table as the natural leadership transition unfolded – and I cannot even remember whether the chair had a vote. It doesn’t matter. But, I do remember that my first meeting as chair involved at least one challenging issue that caused the membership to look to me – not the president – for leadership. As my new role as chair, I was unsuccessful at pitching the issue back to the president. And, I remember it did not feel right. It was awkward. The current president was fully capable of leading, but the membership seemed not to have made that transition quickly enough. It was awkward, I did not like it, and I did not feel that I had handled the situation very well. I sought the opinion of a trusted elder statesman, one who was himself long familiar with the organization, and his advice was (at least in my recollection) very sound. The advice served to build the foundation upon which I began to act, almost always, at the conclusion of all of my future community leadership positions: he advised me to get out of the way because my time was up (those were his words). It took me quite a while to understand the importance of getting out of the way – or, as I have called it in this article, walking away – but, I was finally able to understand the concept well enough to proactively articulate it in future situations that I found to be similar. While getting out of the way is hardly a new concept – everything has its season – only change is constant – it still takes some doing to figure out if and how and when to get out of the way. Perhaps getting out of the way is not a very natural action for us to take. After all, we all want to be wanted; we want to matter. My little speech went something like this. I would call my successor – or, depending on the situation, actually meet with him or her – and I would explain my decision to walk away, step aside, allowing him/her to fully enjoy the opportunity to lead, just as I had. I would explain that I had served my time, tried to do my best, hoped I had made a difference, still cared deeply about the organization, and would always be just a phone call away if I were needed. I would explain that I did not wish to run the risk of interfering with new ideas, being misunderstood for stating my opinions, or – even worse – running any risk of derailing opportunities new leadership had to make even better changes for the future of the organization. I must admit that my little speech may never have been fully understood. Or, maybe it was better understood than I will ever know. Who knows? But, the point of the story is that I found – with the advice of a trusted advisor – and with my own inner counsel – the approach that seemed to be mutually beneficial for me and the organization. I walked away – I did not run away, nor did I walk away mad. I did not make myself unavailable to those who wanted a sounding board, or an opportunity to vent their frustrations, or the safe harbor to bounce around a wild idea in confidence. I believe I now have about a dozen of these experiences. Do I ever worry if I did the right thing? Sure. Do I ever find it hard to let go and are there times when I wish I hadn’t? Of course. Do I feel a bit guilty, especially when folks call me up and talk to me about the way things used to be and they wish it could be that way again? Yep. But, I walked away. http://www.centerega.com/our-blog/post/rekindle-your-mission-provide-hope-in-your-community.html Let’s face it, the Non-Profit Sector enjoys a unique role in our communities. And, there is no time like the present to offer the hope that a non-profit’s mission can bring to the people you serve. By definition, your organization has a unique mission to share – were it not so, the IRS would not have granted your charitable status! In a time where our communities are reeling from the effects of the economy, harsh rains, snow, wind, fire, floods, and the like, we would recommend you take a moment to rekindle your mission. What does your mission say? What does your organization do? Are there some community needs within your mission that can provide hope in your community? Is it time to reintroduce your organization to your community? You do remember that you have a mission statement, right? While it was likely conceived a good while ago, and while it is probably a little broad or maybe too vague or the words don’t say exactly what they should, we are living in a time when your organization is needed more than ever to bring new hope and ideas to your community. That’s why you exist! To ‘rekindle’ your mission, as we say, start with finding it and reading it. Actually, spend some quality time studying it. Does it give you hope? Does it empower you to instill hope and take action on issues of importance in your community? If the words are not clear, then ponder how you could tweak your mission statement and make them clearer – actually, really clear – so that your constituents readily understand why you exist and what your role can and should be. You have a truly wonderful opportunity in the midst of challenging times. Although the focus of this article is serving your community, through hope, within the unique mission you provide, we suggest that you not miss the opportunity to reinvigorate staff, volunteers, and board members as you rekindle your mission. We know that without dedicated workers and volunteers in your non-profit, you will fall short of your mission, so the act of providing hope and a renewed level of excitement within your organization is an important key ingredient to achieving your mission in the community. So, exactly how would you go about organizing a ‘rekindling activity’ inside your organization? We will only suggest an example that you can control entirely, that will cost nothing, and is guaranteed to work – if for no other reason than it has probably not been done before! After you, presumably as the board chair or the executive director, have studied your current mission statement and developed some initial thoughts about how to rekindle it, call a meeting of your key internal advisors – that may be key staff, all staff, a few board members, devoted volunteers, whatever is appropriate for your unique organization – and conduct the meeting in a way that is intentionally different from the norm in your non-profit. For example, if you have staff meetings on Wednesdays at 10 a.m., call your special meeting at some other time! If your board meetings are always at lunch, then call a special meeting for breakfast! You are trying rekindle excitement, dedication, and commitment, so make sure you do something that is very obviously different from the norm. Prior to your meeting, send out your mission statement, with your thoughts and notes on what jumps out at you that can provide hope to your community at this precise moment. We are not particularly suggesting that this exercise results in a revision of your mission (although it might) but, rather, we are suggesting that all missions provide room for creativity and excitement when intentionally interpreted in that manner. In your cover note, tell the participants that you are excited about some opportunities you have been thinking about and that you want to get their input. Remind them of the importance of your organization and your mission of community service. In short, prepare them for an exciting meeting that will have one or two specific outcomes – opportunities for hope – that will get done. What are those outcomes? Let them flow from the meeting participants! To be realistic, monkeying around with a sacred mission statement can be a tricky thing, so you really want to rise above all of that. Quite simply, you are looking for a much-needed, easy-to-implement idea, which fulfills your mission in the community in your own unique way. You know your organization can make a difference and you are about to provide the leadership to make it happen. So, while you may arrive to the meeting with a couple of ideas, or you may have some participants that have some other ideas, let the group flow toward consensus. If you facilitate properly, this will happen. The main ingredient in this meeting is excitement (an attitude) that leads to hope (by a specific doable thing). Who knows? You might get lucky and end up with several great ideas. But, the most important thing is that you come away from this special meeting with one solid idea. Our organization teaches through case studies, or examples, so we will provide an example. Let’s say your non-profit is a museum. Any museum. You have a mission to share your collection and your unique way of educating the public within your community. You already know that. Is there a constituency within your community that is underserved? How about an event that brings in a group from a local retirement home? Imagine the excitement and hope that such a visit could instill! What does it cost? Probably nothing. Most retirement homes have transportation for groups of residents. If not, call a bus company and ask for a one-time donation of services. It is pretty amazing how donors are willing to make a one-time gift of their services for an unusual idea that will bring hope to the community. There’s a certain good will component for the donor. Ah, and for your organization. After all, that’s why you exist. Your local media might even find your project of hope to be of interest! Your community needs your non-profit now more than ever. Good luck. Make it happen. And, please let us know how it goes. http://www.centerega.com/our-blog/post/the-study-of-ethics-doing-no-harm-vs-doing-whats-right.html I continue to urge the study of ethics as a proactive exercise for all non-profit organizations. In my previous articles, I have stated that I find ethics to be among the most important business issues of our time (and all time). The purpose of this article is to draw distinctions between the options for ethics introspection and to urge an active and thoughtful approach to the study of ethics and its resulting application to your organization. Simply stated, nobody can define ‘ethics’ for your organization. Sure, it’s a pretty easy thing to provide you with a list of things that are obviously wrong that you should avoid, but the power of a ‘study in ethics’ lies primarily in the active study of the issue, not in the passive reading of standardized prescriptions, books, or series of articles. In other words, to really study ethics, you must truly give it some thought and, most importantly, you must apply your thoughts to the particular circumstances of your own organization. If you take the time to do that, you can raise the issue of ethics from the level of ‘compliance’ to ‘excellence’ – and, your non-profit will have an opportunity to positively distinguish itself in a time of unprecedented funding competition among your contributors and grantors. Fairly common is the notion that ethical behavior may be defined as ‘doing no harm’ and, while I do not disagree with this premise, I do not believe it is appropriately proactive for the kind of study in ethics that I advocate. There is just something about the phrase ‘doing no harm’ that immediately leads me to wonder about going a step beyond. And, in any commitment to excellence, going the extra distance is always the determining factor. It just seems that the notion of ‘doing no harm’ only take us to a point of achieving some minimum standard, of erring on the side of caution, of not stepping across the line, of playing it safe. This interpretation of ethics falls short of its full potential. If your study in ethics leads you to adopt a mantra of ‘doing what’s right’ then it becomes considerably more proactive. While only you can define what ‘right’ means for your non-profit organization, it is entirely logical that discerning what is ‘right’ becomes a more aggressive and positive study than avoiding what is ‘wrong’ (i.e. the notion of ‘harm’). I was once consulting with a quasi-governmental housing agency and was in a meeting with a number of its top managers. The issue at hand was the development of a relocation policy for residents about to be effected by the renovation of a housing development. The management staff was struggling with the specifics of the development of the policy – which was a very appropriate subject for discussion, debate, and decision – after all, the policy would need to be fair, anticipate all manner of unforeseen contingencies, and be applied consistently among several hundred affected residents. In other words, although unspoken, the policy needed to be ethical (however that was to be defined). It needed to either ‘do no harm’ or at least minimize the amount of harm inherent to the naturally disruptive activity of relocating a household. The challenges of developing the policy were real and the angst surrounding the discussion was appropriate. After a healthy and open dialogue session, the enlightened executive director summed up staff’s various concerns, issues, and suggestions by simply stating that he wanted the organization to be firmly grounded in ‘doing what’s right’ in the application of the policy. To this day, I recall the positive and transformative shift that occurred in that meeting once the notion of ‘doing what’s right’ was introduced as the guiding principle. Now, of course, ‘right’ means something a little different to everybody, so how does ‘right’ really provide direction for staff when determining proper policy interpretation? Well, I can tell you this, without any reservation, I do not recall a single incident when ‘right’ did not result in exceeding expectations and tipping the scales in the appropriate direction whenever an interpretation of that policy arose. The person selected to head the activity had no experience in that area – nobody on the staff did – but she understood the concept of ‘right’ and she applied it fairly and consistently. She also completed her tasks on time and on budget, so the daily performance of her duties required difficult decisions; it was never intimated that ‘right’ would always be easy. The notion of ‘right’ turned her daily application of a much-dreaded relocation requirement into an award-winning, unprecedented fulfillment of a critical activity that was a very early step in the scope of work for a large multi-year project. Had the initial relocation part of the project gone poorly, the success of the overall renovation would have been potentially irreparably jeopardized. Quite simply, though, it worked. And, it worked very well. Through this case study, I now have a realistic understanding of ‘doing what’s right’ and knowing that it works. I would recommend that your own study of ethics include some research and some quiet time. Does your organization have an ethics policy? If so, get it out and review it; if not, find a couple of examples and study them. Then, spend some quiet time and ponder how you would craft your own ethics policy for a presentation to your board of directors. I believe that this approach will provide you with a successful study in ethics and will begin to shape a draft policy that can transform your organization – from ‘safe’ to ‘excellent’ – and, I believe the future of your non-profit depends on it. Endeavor to make it so. http://www.centerega.com/our-blog/post/cega-case-study-feed-the-children-where-are-the-policies.html It’s any non-profit’s worst nightmare: a February 18, 2010 CBS News 6 p.m. national story by Katie Couric that highlights a complaint of misused funds by a charity. Where are the policies that guide the governance, ethics, and accountability of the non-profit? This article will serve as a case study to highlight the importance of several very obvious issues that could have been easily prevented. It is not intended as a review of “Feed the Children” or an evaluation of the need or the effectiveness of its program. Rather, it is a reaction to the elements presented in the news story and an illustration of how proper policies can prevent and/or guide an organization during a time of accusation or investigation, neither of which should necessarily be bad for any non-profit. CEGA believes that all non-profits need ‘a seal of approval’ and the problems highlighted by the “Feed the Children” news story provide an excellent learning opportunity.By way of brief background, “Feed the Children” was reportedly the fifth largest charity, with annual contributions of over $1 billion. CBS reported on a very public dispute between its founder and his daughter, who is now employed by the charity. Allegations of misuse of funds have been made public in various lawsuits and countersuits. A watchdog organization reports that the charity has been questioned for over a decade about its operation. Among the very serious allegations are that only 15% of the funds raised directly support the need for which the charity was established. Recent allegations include disaster relief efforts in Haiti, whereby camps have been established to feed hungry children. The investigation by CBS into the operation of a Haiti relief camp indicates considerable confusion and misinformation surrounding performance of the charity and the role it was to play. The United Nations alleges falsehoods by the charity. It has been reported that no meals were served by the charity to any children after two weeks of camp operation. Amid the investigative reporting for the CBS story, the Haiti-based coordinator for “Feed the Children” resigned last week.Let’s start with what we believe is the single most important policy for any non-profit: its conflict of interest policy. Such a policy could be very brief – or very inclusive – or it could include specific subpolicies, but the conflict of interest policy should guide an organization whenever there is an issue, for example, between its founder and family member who is an employee of the charity. Such a policy may rightly prohibit the employment of a family member, and may describe the types of financial transactions that are and are not acceptable by the charity. For example, spending charitable funds on the lifestyle of any employee is not good policy for any non-profit. If such a policy is in place, the governing body, presumably its board of directors, has a working tool in place to measure compliance. And, if the policy has been adopted and is on record, it states, for all donors to see, the intentions of the organization.The absence of such a policy does not mean the intentions were not appropriate, but it sure makes it difficult to prove, to measure, and to govern. Having any policy in place before a problem occurs can only be considered wise and proactive. CEGA believes that such proactivity will become increasingly important as donor contributions become more and more discerning. While the conflict of interest policy should provide the cornerstone for any set of non-profit policies, many other policies can be customized to meet the specific needs of an organization. Examples include: investment policies, policies that guide administrative costs versus direct services (which are required reporting for non-profits in many states), employment policies that restrict the hiring of family members and, more specifically, establish an arms-length distance between the board of directors and the staff, so that family members cannot serve on the board that appoints other family members as staff. Other examples include strict guidelines on appropriate expenditures, particularly all that fall under the category of “entertainment and expense reimbursement” and policies that outline the compensation methodology adopted by the board. Absence of such policies leaves open the opportunity for allegations and does not provide the board with the tools for making clear determinations when circumstances arise. Let us hasten to add that the mere adoption of policy does not ensure the proper operation of the non-profit; the intent of the policy must become part of the fabric and culture of the organization, which accrues to its benefit over time.When a non-profit faces an accusation that would destroy the public trust placed in that organization, it is nothing short of tragic to learn that the operation was not guided by sound policy and guidelines. In the wake of Enron and Madoff, a wise non-profit would do well to anticipate increased regulation of the likes of Sarbanes-Oxley and to move boldly toward self-regulation as a competitive advantage over its peer organizations. Why? Because enlightened self-governance is always the right thing to do. And, compliance with the IRS regulations that enabled the establishment of the charitable organization is the law. http://www.centerega.com/our-blog/post/defining-your-executive-accountability.html In our study of ethics, governance, and accountability at CEGA, we find that certain principles are more readily comprehendible and applicable than others. For example, ethics and governance seem to be more definable than, say, the issue of accountability. Why is that so? We believe it may have to do with the fact that accountability is a bit more amorphous: is it something that you heap upon yourself, or is it something that is done unto you? We will explore the importance of defining executive accountability in this article because we suggest it can be an instructive leadership tool. To the extent that a non-profit organization clearly understands that the IRS is its regulatory agency – a very different function than the IRS serves for either individuals or for-profit organizations – then the issue of accountability connotes ‘penalties, recompense, and consequences’ for unacceptable behavior. A ‘punishment’ of sorts. At CEGA, our goal is to move issues such as accountability to the proactive level where it can become an attribute of the non-profit in its competition for funding dollars and program excellence. Let’s take a look at a couple of pertinent examples. We selected these examples to make you think and they may not immediately appear applicable to a discussion on accountability. But, they truly are. In a recent Newsweek magazine article, Rowan Williams, Archbishop of Canterbury, shares his thought that “Being human is learning how to ask critical questions of your own habits and compulsions, and it’s learning how to adjust them against a model of human behavior – an idealized truth about the purpose of our humanity.” He goes on to talk about “balancing acts” and “calculations of self-interest and security” and “resolution of buried tensions” and directs them toward an ultimate end: “as a means to finding our way to a life that manifests something, a life that doesn’t just solve problems of survival and profit.” (Newsweek, February 8, 2010, page 11) In her book, “How to Get Your Wiggle Back,” author Nan Hoy Shaw tells a story she says has been around for a long time. She calls it the “White Horse” story and it’s about an old man, the son he loves, the white horse he finds, the king that wants to buy his white horse, the white horse that leaves him and then returns with even more white horses, and so on. It’s a story about life and our outlook on life; a story that could go on and on, without end. And, as Shaw says, “The point is that the old man was able to focus and identify what he knew without judging the rightness or wrongness of the situation.” She goes on to say, “Many of us often have pieces of information that we judge as good or bad when we really don’t know very much of the story at all.” (“How to Get Your Wiggle Back” – Nan Hoy Shaw, Mattermatics Publishing, © 2009, page 49) Executive-level leaders need to solve an equation. An equation just for themselves. We suggest that it could look like this: Proactive Leadership Excellence + Asking Critical Questions + Gathering Buried Information + Avoiding Judgment = Executive Accountability. That's not THE equation, but that's AN equation. Simply a starting point. Some of the components in this ‘equation’ are subjective and some are objective, which adds to the challenge of coming up with your own personal solution. These challenges serve to strengthen an outcome that can best be derived through your own reflections and pursuits.  How does ‘executive’ accountability differ from what is expected of others? Simple. If you are in a position of authority – in particular, we would suggest, in a non-profit organization where your very existence is a regulatory privilege (your IRS exemption letter) and your primary mission (per your IRS excemption application) is community service – then you (as executive director) should bear an appropriately heavier burden on issues of accountability in keeping with the position of responsibility you hold. There simply must be no denying this fact. (If you harbor any doubt whatsoever, ask yourself if the governance structure of your non-profit is solid.) I was recently given a real example by a long-time board member of a local non-profit organization (who was also a former chair of that board, so he had good experience -- both in governance and with the mission of the specific organization). He shared with me that he recently attended an executive committee meeting whereupon the executive director was openly berating a staff member about whatever issue was being questioned by the board members. However you would choose to define ‘executive accountability’ for yourself  -- and within the context of your organization -- we would suggest this true example serves to epitomize a leadership behavior and an accountability style that you should not emulate! Please consider: if you were to ponder this example -- and demonstrate an accountability style that was the antithesis (absolute opposite) of the example shared above, then do you think the board member would have shared a different and more positive story? When you found this article, were you hoping for a prescription that would lead you to one of those ‘one-size-fits-all’ definitions of executive accountability? If so, then we were not likely successful as you reach the conclusion of this article. However, if you have found a few tid-bits in this article that you feel are thought-provoking and realistic, then hopefully these issues will better inform your own personal search for the solution to your very own and unique ‘equation.’ If so, then this article has accomplished its purpose. We would invite and encourage you to participate in an instructive dialogue with your peers by replying to this blog post and sharing your actual experiences as well as your thoughts. We believe that actual examples -- and real dialogue -- is of major benefit to everyone as we seek to move closer toward excellence. http://www.centerega.com/our-blog/post/living-ethically-among-the-unethical.html Ethics is among the most important business issues of our time. Many believe we have reached the tipping point. Given the similar – yet important differences - between non-profits and for-profits, an informed dialogue about the issues of non-profit ethics is of growing importance. This article will serve to frame the issue of ethics in the non-profit arena and, specifically, will illuminate challenges that the unethical status quo poses to even the best intentioned aspiring practitioners of ethical behavior.A word of caution before we begin: being a student and devotee to the principles of ethics should not be misinterpreted as any ‘holier than thou’ stance. Just because I believe ethics to be critical to success in our world today does not anoint me in any way, nor does it mean I have found the perfect style, nor does it mean I should be empowered to discern the choices made by others. Instead, what I intend to accomplish with this dialogue is a realistic assessment of the role ethics should play in our daily decision-making process, together with an honest admission that it is tough to ‘play by the rules’ when it often seems that others do not – this is particularly challenging when it appears that others have no apparent conscience about their decision to ignore the importance of ethics in their lives. These are real issues – true challenges – and it seems to me that the very best we can do is be willing to talk about the issues, learn from our experiences, and define our own personal commitment to ethical behavior.Readers of my articles know that I like to use actual examples – which I often call ‘case studies’ – to provide insights into the situations we are attempting to analyze. I believe very strongly that the use of actual examples takes us away from an ‘opinion-based’ approach and allows us to enter a ‘fact-based,’ carefully researched, informed approach. The differences between opinion and fact, I believe, are very important. Quite frankly, when it comes to learning about issues as important as ethics, I am not much interested in opinions – I want the facts and I want examples that help me make the tough decisions. So, that’s what this article is all about.Example 1: I was driving on a divided highway and a car approached me in the opposite direction, slowed down, abruptly made a U-turn onto my side of the highway, stayed in my lane, did not accelerate, and nearly killed us both. Guess what? There was not a car in sight behind me! That was a real situation. The fact that we both could have died was real as well. But, importantly, that was not an ethical situation! There was nothing unethical about a person making that particular stupid decision. It’s of no use to analyze why that driver did what they did. After I got my wits about me, I thought to myself that it was entirely likely that the driver did not even know what they had done. This example provides some guidance on what ethics is not. In the absolute, ethics is not about ‘shades of gray’ – it’s a clear-cut (right or wrong/yes or no) outcome – either it’s ethical or it’s not. However, to the extent that our society wants to create distinctions of gray, the challenge of ‘living ethically among the unethical’ is heightened. The societal penchant that yearns for ‘gray’ makes it all the more important that a personal process for determining ethical behavior be defined as precisely as possible in order that it may be practiced with clarity and purpose.The study of ethics must be founded upon a system, or a set, of moral values; or, you may prefer to consider them to be principles. We know from other bodies of research and many popular self-improvement programs that we are supposed to view ‘principles’ as fundamental laws – unchangeable – clearly understood – that provide us with certain rules of conduct that can serve to provide assurances about our behavior which enable us to transcend all shades of gray. To be guided by such principles, those very principles must be inherently interwoven into the very psyche of the individual. The knowledge, practice, and application of those principles must be initially a conscious decision (as we seek to learn) and then morph into an unconscious foundational component (as we seek to apply). No list of ethical behaviors exists; we are left to be guided by what we know (fundamentally) to be a disciplined approach to dealing with good or bad, right or wrong. It is not, thankfully, unethical for people to be in dispute, to have differences of opinions, and to fiercely defend their beliefs.Example 2: A current issue of great national confusion – the Wall Street Bailout and Bonuses – is a useful example. The day-to-day test of ethical behavior must be (emphasize: MUST be) distinguishable in the simple question that should always be in the back of our minds: ‘Am I doing the right thing?’ Without intending to assign any absolute meanings to any description of the Wall Street example, the majority of the American people likely understood that federal funds ‘bailed out’ Wall Street, may have believed that economic stability was at stake, and probably felt that a successful outcome necessitated action (even if the majority of us don’t really understand the science involved), but few Americans seem to accept the ongoing bonus payouts and high salaries that continue among those companies that were bailed out. Legal? Probably. The right thing to do? Doubtful. But, most importantly, was it ethical? No. Here’s why: to the extent that conscious decisions, strategic plans, CEO and board-driven actions were guided by the need to return stimulus money to the feds in order to restore the payment of bonuses, then those decisions step across the line of principle and indicate an ethical breach was consciously made. The likelihood that this is true is exacerbated by the fact that the programmatic public purpose of the stimulus funding plan has been a failure by any measure. Applying the simple question: ‘Am I doing the right thing?’ the Wall Street example is very instructive in any dialogue concerning ethics. And, let us not forget, what is ‘legal’ is not always what is ‘morally right’ (ethical), even though the opposite is not true (nothing can be illegal yet ethical). Suggestion: if you have to ask yourself if an action is ethical, chances are it is not. You should recheck your moral compass.But, how do you draw a distinction between legal/illegal and ethical/unethical? My third and final case study actually involves a non-profit situation that is directly related to the issues of ethics in the daily life of an executive director. The great thing about case studies is that they are real. You simply cannot invent anything nearly as good as a factual example.Example 3: A relatively new non-profit organization was on the verge of consummating its largest deal. The organization was to sell a non-performing real estate asset to a buyer/donor whereupon the proceeds would become the lead gift in what was the ‘quiet phase’ of a yet-to-be-publicly-announced capital campaign. The deal was years in the making. A letter of intent had been dated three years previously. The closing was set and, as things happen, a breakdown in communications resulted in the deal being called off. The breakdown was related to the terms of the funds that had been designated by the donor. A meeting was requested by the donor with the volunteer board chair. The executive director attended the meeting as well. During the meeting, the chair of the non-profit board explained that the non-profit was truly trying to be accommodating, but that the donor had caused the problem by changing the terms of the deal at the last minute. Confused, the donor looked at the executive director for clarification, but got none. Realizing that the chair was genuinely concerned, well-intentioned, yet uninformed, the donor sized up the situation properly, decided to acquiesce, and the deal went through. What happened? The executive director had never shared the donor’s letter of intent (which was three years old – and – spelled out the precise wishes) with the board. Realizing what had happened – and desiring to rise to the charitable cause that the deal was created to serve – the donor did not point out to the board chair that the executive director had withheld the written documentation that substantiated the very issue that the donor was trying to resolve. To this day, that piece of information remains known to only a very few people. So, was there a legal issue? Yes, there sure could have been – in other words, the donor would have had legal grounds not to close on the deal – the letter clearly identified the terms. But, beyond the legal issue, and desiring to do the ‘right thing’ the donor rose to the occasion, focused on the charitable issue, and decided not to point out the obvious ethical breach: namely, that the executive director never shared the information with the board. How does this happen? At any point over a three-year period, would not an occasion have arisen by which the facts/intentions of the donor would have been communicated by the executive director to the board? But, unfortunately, poor communications is not an ethical issue. When did this situation become an ethical one? I would suggest that the ethical breach took place on the part of the executive director at least by the time the donor questioned the confusion that surrounded the deal, called the executive director, and requested a meeting with the board chair. It was not ethical for the executive director to continue to withhold information from the board about the terms of the deal nor was it ethical for the executive director to allow the donor to believe the board had known the true facts. At that particular point in the meeting, the donor did not know what the board chair did not know. Nor did the donor have any reason to suspect that a three-year-old written document had not been shared with the non-profit board by its executive director. One must question why the executive director never told the board – not even when there was significant opportunity for embarrassing exposure in the meeting. The question ‘is it right?’ continues to resonate. And, it’s ‘not right’ to withhold pertinent information, watch a disagreement unfold, make no attempt to set the record straight, and continue to act as if there was never clarity on the matter. Currently, there stands a donor that will always wonder what else that same executive director has not revealed about other deals. That’s a fair concern for this donor to have – and, it undermines the entire charitable process for the non-profit organization. How does this donor go about ‘living ethically among the unethical’ executive director?It is my hope that continued dialogue on the importance of ethics can be stimulated by this article. The organization to which I belong, The Center for Ethics, Governance, and Accountability (CEGA) is committed to creating ongoing opportunities for non-profit leaders to share case studies on issues of ethics. Given the complexity of the subject matter – and the importance that ethics plays in the overall existence of any non-profit organization – it is my desire to see the level of consciousness and awareness raised to the point where ethics is on our minds every single day – especially, the simple yet powerful question: “is this the right thing to do?” http://www.centerega.com/our-blog/post/executive-directors-happy-new-year-happy-new-decade.html Happy New Year to all the executive directors of all the non-profit organizations across our country! Actually, it’s not just a new year, but it’s a New Decade. Endeavor to make the most of it. I am increasingly of the opinion that ‘ethics’ is the key issue that will set your organization apart from all the rest. Sadly, we are not having to look far to find examples – actually, case studies in-of-themselves – of serious ethical breaches all around us. Do you follow them? More importantly, do you analyze them and seek to apply them to your organization? Have you led a fact-based (i.e., actual example) discussion with your board of directors on an ethical issue that could be related to your own organization for the purpose of being instructional, defining leadership, and differentiating your organization from your peers? Is this something you could do in the New Year? If you did, do you agree it would serve your organization well in the New Decade? Let’s face it, as an executive director, you are in the most challenging situation that you have likely ever experienced. While you are definitely not alone, the fact that there are so many non-profit organizations – of extremely diverse mission and purpose – actually minimizes your opportunity to develop a meaningful support network. The non-profits in your community, while conveniently located around you, are your fierce competitors for precious (and dwindling) contribution funding. Finding non-profits of like kind across a broader geographic area takes time and still locks you into a competitive situation. But, connecting yourself with a diverse non-profit executive director network need not be such a challenge – use the power of the technology available to you – use the web and its powerful networking opportunities. Our organization, The Center for Ethics, Governance, and Accountability (CEGA), has but one focus: to provide a safe-haven opportunity for dialogue and reflection among non-profits using ethics (and governance and accountability) as the foundation for strengthening your skills and the reputation of your organization. We have no other priority. No seminars, no library of broad-based information, no national meetings, no field trips – just a full focus on the most challenging issue of our time: ethics. What examples of ethical breaches have you noted in the first three weeks of this New Year? What is the modern day equivalent of “sacred honor?” Virginia just inaugurated its new governor who quoted our Declaration of Independence: namely, that we pledge “our sacred honor” – what does that mean today? Let’s avoid the national (and especially the political) examples that everyone is likely to have already seen or heard; instead, let’s take a look at some real examples – on a smaller, personal, local scale – that all executive directors can incorporate into their thinking. The Harvard Business School has long utilized what it calls a ‘case study’ approach to teaching. CEGA is committed to case studies because they are real, highly instructive, and promote dialogue and thought. In this article, three different examples are offered for your consideration. One involves a non-profit, another is a department of a small local government, and the last is a membership association – but all can be instructional if you apply the situation to your own. A contractor signs an agreement that contains recitals (promises) that are consideration (an inducement to enter a legal contract) but then decides, without explanation, not to honor those promises – and tells you “to sue him” – which is always your right, but is not your desire. Your organization, which is typically the ‘little guy’ in such a disagreement, probably cannot afford to sue – you don’t have the time or the money – so what do you do? Are you in a legal dispute? Sure. But, I would argue the foundational element is ultimately an ethical one. How do you get somebody to behave ethically and honor their word if they have chosen not to do so? A local government entices a successful non-profit organization to relocate across jurisdictional boundaries with the promise that substantial local funding will be provided annually. The executive director works hard on the deal and the board carefully considers the move and approves it. Barely two years later, in what is termed a regretful cost-reduction decision due to the severity of the economic times, the local government eliminates its funding support of the non-profit. The executive director and the board struggles with the situation and is ultimately forced to make the hard decision to close its doors. But, it gets worse. The economic development folks of the same local government approach another non-profit about partnering to offer the same services as it had promised to the previous organization. Wow! How do you even start to understand the issues entangled with this example? Does it make a difference that the non-profit that was driven out is a nationally award winning performer – or – that the ‘new’ non-profit partner has no experience at all? Again, I would argue that the foundational element is an ethical one. An association ‘goes to bid’ on some required professional services. The ‘bid’ is received from a client and friend of the president of the association. When compared to the existing service provider, there is a substantial cost savings, which on the surface sounds like a good thing. Under closer scrutiny, especially since the professional services are regulated by state government, it turns out that the cost savings are the result of a reduced scope of services by the new provider. Worse, the association collects on a claim with the existing service provider even after it knows it will not be continuing its contract. The members of the association are not fully informed of the details; they are told there is a new service provider who is offering more service for less money. Everybody seems happy, right? Wrong! The now-previous service provider has been used and dumped. The savvy association members have asked questions but they cannot get answers. The silent majority does not even know to ask questions. In the end, the association president has done business with a buddy, contracted for inferior services, and left the membership at a disadvantage. Yet another ethical dilemma has occurred in a routine, day-to-day, organizational decision-making process. As executive directors, you have no doubt read about such examples – in fact, you may have even had the misfortune of being involved in such a mishap. There is a common theme that I find very disturbing as we analyze these case studies: the decision maker would argue vigorously that he or she was doing the right thing! Unbelievable. But, unfortunately, very true. And, from my experience, I believe that those committing these unethical acts have deluded themselves into believing that they are correct. Do you see the criticality of focusing on the issue of ethics as we move forward? In order to develop successful strategies for saving or growing your non-profit organization, I would suggest that you should be totally invested in the inward and outward demonstration of ethics. Only you can highlight the importance of ethics among your staff, board, customers, and contributors. Not only is it the right thing to do – and not only is it among the key problems facing our country today – but, a commitment and dedication to ethics can give you an honorable and well-deserved competitive advantage among your peers. Happy New Decade!