Nonprofit University Blog

As I am sure someone much wiser than I once said, “There are lessons to be learned from tragedy.”  So, I hope nonprofits all around the world are watching what is happening in Pennsylvania.

Pennsylvania is almost two months overdue in passing a state budget.  Until last week, state employees had not been paid since the start of the new fiscal year.  Vendors have not been paid since the start of the new fiscal year.  And the emergency budget that was passed last week only opened up the bank to state employees, not to the vendors.

Many of the vendors who have not been paid for almost two months now are nonprofits who have state contracts to do a variety of things, from jobs training and GED classes to helping abuse victims find shelter to feeding the elder and home-bound.  Many of these organizations are used to the state not passing the budget on time and, thus, are used to a tight July.  They know how to handle that without too much, if any, disruption to their work.  But a tight July and August, with the possibility that this budget stalemate will malinger into September?  This, they are not prepared for, and it is showing.  If they are among the lucky organizations, they are surviving by dipping into reserves and/or tapping a line of credit.  If they are not among the lucky, they are doing all of that as well as laying off staff, closing down programs.

Terrible, right?  Absolutely, no question about that!  But how much of this did they bring upon themselves?  Quite a bit, I’d have to say.  When, as is the case with many of the organizations currently suffering, they rely on the government to supply 90 percent of their budget, they have brought their current distress on themselves.  

No organization is in a safe position when the vast majority of its income comes from one source.  Organizations that want to be to fiscally sound, that want to be able to weather bad economies, shifting funder priorities and timelines and the other vagaries of raising money must have diversified income streams, relying on as many of the streams available to them—foundations, corporations, government, individuals, and earned dollars—as possible.  And within each stream, there must be diversification as well.  Then, if one stream goes dry or there are shifts in priorities by members within a stream or in a whole stream, the organization still has significant dollars coming in from other sources to carry on its business.

Having a successful and sustainable diversified funding stream requires an awful lot of work by both board and staff—much more than if you simply have one source of income.  But how much work does it take to decide which of your vital programs should be cut or closed down?  How much work does it take to decide if the organization can survive and still be here next month or next year?  And it takes more than just work to turn away an abused woman or a hungry child or a homeless family.

So, let’s learn from the tragedies of this budget fiasco and take a pledge to never allow your organization to be in the position of facing the possibility of closing because of something you didn’t do but should have done.  Diversify now.

  
I run a business.  It is a business that is designed to help nonprofits.  So, our product is help.  That’s how we earn our living, pay our bills.  But why do people think that we should give that product away for free?  If my business were manufacturing sneakers, my phone would not ring off the hook with requests that I give away free sneakers.  I would not be contacted by people three blocks away saying they are starting a sneaker factory and would I please tell them how to do it because even though they’re about to open a sneaker factory, they have no idea how to do it.  They are not, after all, experts at starting or running a sneaker factor which, presumably, I am.  So, someone suggested that they call me, the sneaker factory guru, with the full expectation that I would share my trade secrets with my competition—the very secrets that make people want to buy my sneakers. 

What for-profit would do that? And yet this happens all of the time in the nonprofit sector.  I get calls from people who have been put in positions for which they are not qualified—nice people, passionate about the mission of their organization, but totally ill-equipped to do the job at hand—asking me to help them be able to do their jobs.  They aren’t contracting for a consulting project.  They are expecting free instruction on how to do their jobs.  They are calling me because they know The Nonprofit Center knows how to do their job.  And they all think we should be happy to help them out—for free.  And the reality is that we usually do.   

But no more! Asking for free help and guidance on how to do a job that otherwise the organization would have to hire someone—oh, say The Nonprofit Center—to do is not collaboration.   It is being cheap and it is devaluing expertise.  If a staff member doesn’t have the ability to do the job assigned, there are several options:  rethink the job assignment; rethink the task at hand; or hire an outside expert to either teach the staff member how to do the job or to do the job itself.  But do not expect that businesses are going to give you for free what you are too cheap to develop internally or pay to bring inside. Recognize that no one can be an expert in all things.  So, value the skills and talents of the staff you have; when staff are lacking, develop the staff you have in legitimate ways.  Do not go asking other nonprofit businesses to give their product away for free so that you can claim it as your own.  We’re worth more than that.  

When one has a past profession and a new one, there is the opportunity for those worlds to collide.  And so it has happened.  My decades as a professor of criminology have met my current world as a nonprofit executive.  But the cause for the intersection is nothing to celebrate.  happy!

In the aftermath of a criminal conviction, as the judge is weighing sentencing options, victims, their family and friends, are allowed to testify or have statements read about the impact of the crime on the victim.  If such testimony had been allowed in the sentencing phases for Vincent Fumo and Ruth Arnao, I would have lined up to testify.  Having heard of the stupefyingly lenient sentence Fumo received—55 months, not even five years!—I would have been near belligerent at Arnao’s sentencing hearing.  

But clearly, I would not have had an impact, as she got one year and a day for being found guilty of not one, not two, but 45 counts of misconduct ranging from fraud and conspiracy to obstructing justice and destroying property sought as part of an FBI investigation.  She will, most likely, serve even less time than this extremely light sentence.  When a judge allows for that great a deviation from the recommendations of sentencing guidelines (which had her facing 9 to 11 years), it would seem nothing would have swayed him.

Nonetheless, perhaps there are other judges out there reading this who can learn from their colleague’s mistake.  Should they find themselves deciding the fate of a nonprofit leader who has violated the public trust, bludgeoned the credibility of the sector; if so, I would hope that they would not dismiss the dregs of the nonprofit sector as the insignificant stepsibling of the almighty for-profit world, the world that matters as opposed to the world that is, after all, “just”
 a charity. And here is what I would tell them.

First, I would point out that the harm Arnao has done goes well beyond the constituents her nonprofit organization had promised to serve, as that nonprofit is on the verge of closing its doors.  But the harm redounds to the nonprofit sector as a whole.  Arnao trampled on the public’s trust, scammed donors into believing their dollars were going for public good when, in fact, they were going for Fumo and Arnao good.  She has added one more blaring headline that the anti-charity folk use in their harangues about nonprofits as tax-free excuses for personal agenda.  And since we don’t get the blaring headlines touting all the good 99% of the sector does, headline readers have no information to counter their thinking.

Second, I absolutely would have decried—and laughed—at the shameless suggestion of the defense that Arnao was unable to resist Fumo’s charisma!  Give me a break!  The criminal defense of PMS syndrome, a syndrome that has far more medical evidence to back it up than being putty in another’s hands, was eventually allowed in only a handful of jurisdictions around this country.  I couldn’t resist his charm?  Come on!  No wonder lawyers have been sinking in the annual survey that ranks professions by the amount of respect they garner.  (In the most recent Harris poll on the prestige of professionals, only 26% of Americans surveyed said lawyers have “very great prestige.”)  Make it up as we go along just adds another brush stroke to the image of nonprofits leaders as spinners of truth in order to take other peoples’ money to do with what they really want.  And unfortunately, this (mis)perception is all too commonly held.

And third, I would have explained to the judge, as he should intimately understand, that there are certain professions which we do and should hold to a higher standard of conduct:  police officers, judges and, I would put here leaders of nonprofit organizations.  For each of these professions, the ability to be successful at the job depends upon maintaining the public’s trust.  A police force that has abused the public’s trust will not be effective.  A judge who has trampled on the public’s trust will have all subsequent decisions ridiculed and will be spurned by lawyers seeking a fair hearing.  And nonprofit leaders who violate their promise of protecting the public’s trust take their nonprofits—and all the good they could and should be doing—with them.  The ripple effect in each of these scenarios goes well beyond the immediate situation.

Arnao was sentenced to eight days per criminal count; she’ll probably end up serving about seven for each count, provided no one else casts a spell upon her causing her to do evil deeds while incarcerated.  Yet the consequences of her actions have harmed the lives of hundreds, if not thousands and the damage to the nonprofit community, and the public’s faith in it, will continue long after they’ve served their time.

In response to a recent blog, I was asked the following question:  What is your opinion on term limits for board members and officers?  Opinions are one thing of which I have no shortage.  So, be careful what you ask!

The debate on term limits has been waging for decades, if not centuries.  So, there is no “settled” answer to this question.  But my own answer is very firm:  term limits—both for board members and officers—are a must.  My reasons underlying this answer are simple, and take into account the arguments put forth by those on the side of no term limits.

1.     If you are doing all the work you are supposed to be doing as a hard working board member—in other words, if you are truly assuming the full array of your board member responsibilities—you get tired.  And after six or nine years of service, and two or three consecutive terms of two or three year terms seems to be the norm, you should be a very tired board member in need of a vacation.  But unless we give board members permission to take that vacation, the hard working ones won’t, despite recognizing their own fatigue.  (Guilt is a powerful emotion.)

2.     Boards need new blood, energy and, perhaps most important, perspective and ideas if they want their organizations to flourish.  Which means boards need new board members. 

3.     What an organization needs on its board in terms of expertise, connections, demographics, and intrinsic qualities is not static.  The needs of an infant organization are very different from those of a mature one;  what it needs during a growth spurt may not be what it needs during a period of stability.  This requires that board members rotate off and new ones come on.

4.     Just because a board member rotates off the board after serving one to the maximum number of terms allowed does not mean that you are throwing that board member away, saying good-bye and good riddance.  Quite the contrary.  Smart organizations have ways to keep those good, hard working board members engaged once their term limit is up.  Folks can continue to serve on committees; they can be put on some kind of auxiliary board, such as a Friends Board or Advisory Board; they can become special ambassadors or mentors to future board leaders, and so much more.  If people are committed enough to your mission to have served as a board member, they are committed enough to execute other roles that will support that mission.  By changing roles within the organization we provide former board members the opportunity to gain a different perspective on the organization so that should they return to board service down the road they have a broader understanding.

5.     Institutional memory should never reside in the memory of one or even several board members.  Possessing the institutional memory is the worst reason for keeping someone on a board, as frequently that is all that person is able or willing to bring to the table.  Institutional history should be documented and in a format that is easily shared with others.  Do not mistake important institutional memories—times lines, milestones in an organization’s history, key leaders, etc—with the minutia that generally gets titled institutional memory.  The kind of Institutional memory that too often resides in peoples’ minds is more often than not used to hold organization’s back, not propel them forward.

6.     Boards must avoid the pitfall of dismissing ideas with “We’ve tried that before.”  Trying something  10 years before is not the same as trying it today, when neither the organization nor the environment in which it is operating should be the same.  Boards populated by individuals who have that institutional memory to remember what was tried—or dismissed without trying—10, 15, 40 years ago—hold organizations back.

7.     All of what has been said above applies equally to board officers.  They get tired, leaders need to be innovative, aware, calculated risk takers, etc.  I’ve seen too many board presidents who have been in office for too long kill the enthusiasm of boards, hold organizations back, squash new ideas.  Being a good board leader, particularly the president, requires hard work.  Burn out can come quickly to a board president with vision, who wishes to accomplish things, who wants to move the board and the organization forward.  What an organization needs in its key leadership positions varies depending upon its strategic priorities.  A very different kind of board president is needed as an organization launches into a capital or endowment campaign than when the organization is recuperating from such a campaign.

So keep sending those questions and I’ll keep expounding in my responses.