board of directors

Ask the Board Chair: Tim Allen, Board Chair of CLASS, Inc.

Recently, Tim Allen, Board Chair of CLASS, Inc. sat down to answer 5 questions about mergers:

CS: Many organizations are considering some form of consolidation or merger these days. As the Chairman of the Board of Directors at CLASS, Inc, how did your organization come to the realization that considering a merger was an important strategic move?

TA: There were a number of considerations, the first being the financial pressures that agencies like ours have been experiencing. Our operating costs increase with each fiscal year but our state and federal reimbursement rates have not kept pace with these increases. We needed to take a step back and consider all options that would allow us to preserve the mission of our agency. We needed to find a way to survive and thrive, and consolidation was our best option.

CS: The merger process requires a great deal of time, capacity, and energy from the Board of Directors. What should Boards considering mergers be prepared for?

TA: The Directors should be prepared to address new issues and a level of complexity that they may not have experienced ever before, both of which require the assistance of subject matter experts to help along the way.

We were fortunate in that we had people on our Board that had previous experience with for- profit mergers and acquisitions. While that has helped us a great deal, we still lacked the expertise in the non-profit space.

Finding someone to guide the Board in understanding the process, what it takes, what needs to be done, as well as the disruption that it causes, is critical in ensuring success.

CS: The merger process does not come without challenges. What are a few of the obstacles or challenges you have faced as Chair? As a Board? And how did you overcome them?

TA: Getting the right Team together, keeping that Team together and understanding what it’s going to take to keep the process moving forward.

As Chair, it was a challenge to keep the merger Team that we established as a subset of the Board in one piece. Every Board experiences turnover for a variety of reasons and we are not exempt from that. It’s a big commitment seeing this process through and holding that Team together. This was something we struggled with. My challenge was to keep that Team together because we needed the knowledge, experience, and comfort that we were accustomed to, during a time of great disruption and uncertainty.

Another challenge stems from the reality that there are many internal and external groups invested in the process that have a seat at the table. We worked hard and found success by keeping open communication with everyone throughout the process. We made sure that everyone was part of the process from its inception and that the level of engagement remained consistent.

It is important for Boards to remember that any challenges, such as those I mentioned, shouldn’t outweigh the benefits of a merger.

CS: Successful mergers are about culture and people, such as Board Members, Staff, and Clients. What insights do you have concerning working with and unifying two Boards?

TA: The best thing we did was to establish a working committee from each organization.

Early on, we arranged a meeting between the two committees. We got to know each other, established a working relationship, and developed a respect for each other. This became our foundation and the mutual respect we had for each other had a trickle-down effect. We took our excitement and comfort with each other back to our respective Boards and that had a very positive impact.

CS: What advice would you give other Board Chairs or Board Members that are considering a merger?

TA: First and foremost, if you don’t have anyone on your Board who has ever been through a merger or acquisition, get help fast. It is always going to be more work than you thought and there is always going to be something that comes up that you didn’t anticipate. Those are the biggest takeaways.

I would also advise the Board to take a close look at other agencies that they can work with and how that relationship will play out. Consider agencies they could partner with to more effectively meet the needs of those served. Seek-out an agency or agencies that have resources that can be shared that may be too expensive to acquire alone.

Industry Trends: The Speed of Decision Making

The amount of time that leaders once had to make decisions has greatly diminished over the last two years.  In today’s on-demand world, CEO’s are now expected to process and react at a much faster pace.

As CEO’s work to keep up with this increase, they must also consider the impact this acceleration has on the working relationship between the Board of Directors and Senior Leadership Team.

In many cases, decisions made by the CEO must first be approved by the Board of Directors. While this is important in regard to checks and balances, which is part of the fiduciary obligation of the Board, and in creating a culture of Teamwork, the outside world is far less understanding and forgiving as they wait on decisions. 

So how do we balance the demands on CEO’s to make swift and sound decisions with the legal oversight and responsibilities of the Board of Directors? 

Solutions may vary but we have 6 tips for empowering CEO’s to make decisions while ensuring the fiduciary obligations of the Board are being met:

  • Be sure your strategic plan reflects the alignment of the Board and Leadership to common decision making

  • Set criteria, such as spending limits and partnership expectations, ahead of time for ease of decision making

  • Create and empower a Board task force to tackle decisions related to specific topics in a more timely manner 

  • Allot for time at each Board meeting to discuss and gain preliminary approval on any potential decision the CEO will need to make on behalf of the organization

  • Change policies that limit non-material decision making

  • Keep honest and open communication to ensure the Board is never caught off guard or surprised by new information 

The pace of decision making and the pressure on leaders to move quickly is positioned to continue to increase. Stay ahead of this trend starting today and determine ways your Board can be adaptive and engaged in this new landscape.

Are Mergers on Your Mind?

Conversations concerning mergers are now occurring across the country more frequently than ever before. We are seeing collaborations and merger discussions across every sector, including healthcare, human services, and even higher education. We believe there is real value in considering mergers as a strategy, but many organizations may not be prepared for the journey. This leaves many to wonder: What needs to be done while considering a merger?

There is no quick answer to this question due to the numerous factors and variables involved. However, we’d like to offer you the following tips from our own merger facilitation experience to help get you started:

  • Engage your Board. The Board of Directors is the single most important stakeholder when considering this type of strategy, so setting a plan for Board engagement and communication is critical. Even more important is making sure that the Board is part of this process from its inception and that the engagement remains consistent. 

  • Your why. What needs are you trying to fulfill in your organization? What value and benefit would a collaboration add? Understanding what your organization needs and how it can be improved, provides the foundation to support assessment and decision making.

  • Build it or Buy it. For those organizations that have reached a size where organic growth is no longer a viable approach, considering mergers as a means of addressing growth strategy, cost savings, quality, or competitiveness is a viable solution.

  • Understand risks and capacity demands. It takes a significant amount of time to build strategy, find candidates, manage the deal, and then integrate once the merger deal is finalized. This could translate to an organization being unable to undertake any other initiatives during this time. Factoring this in to planning avoids the pitfalls of being overburdened or strained.

  • Answer difficult questions first! Once the process is underway, there are several critical questions concerning the surviving entity that need to be answered in order to avoid wasting time: Who will serve as the Executive Team and Board Officers? What will the surviving brand be? Who will serve on the Board of Directors? Answering these questions early on will make decision making much easier as the process moves ahead.

  • Make the tough decisions. Once the merger contract is signed, the implementation process begins. It is during this phase that decisions need to be made around restructuring. These decisions are often very difficult and stressful but, with the right approach, frustrations can be minimized. For our insights on restructuring during an Organization Design project, click here.

  • Mergers are about people. An organization’s culture is formed over time through shared values and mergers begin with the people who make up that culture. In part, a merger is the unification of two cultures, so you’ll need to allow ample time for due diligence. During this phase difficult questions will arise as an in-depth review of financials, governance, human resources, organization charts, and planning documents will occur. This is also a time to become more familiar with people and their abilities through engagement, communication, and feedback.

Considering a merger is a significant decision for any organization but preparedness is key. A successful merger will help an organization eliminate competition, acquire talent, save money, expand geographic impact, and improve quality of service, among other countless benefits. Most importantly, a merger can ensure survival in a highly competitive marketplace and allow organizations to continue the positive impact they have on society.

If you have an interest in learning about merger strategy and discussing whether it is a viable approach for you, please connect with us here.

Building Breakthrough Boards - Step 5 Evaluate

Step 5: Evaluate
“What gets measured gets improved” -Peter Drucker

Boards perform better when they are constantly evaluating their own performance and effectiveness. The board of directors should consider building a board plan-within-the-strategic plan. Once the board has agreed to its own plan, it will need to assess its own performance.

According to a recent McKinsey survey of executives and directors of nonprofit social-service organizations found that only 17% of the respondents felt that their boards were as effective as possible.

“We found that many nonprofit boards struggle with basics such as recruiting the right members and running meetings effectively. The first task, then, is to nail down the fundamentals—a clear vision, appropriate board membership, and effective processes—because these elements enable directors to avoid wasting a great deal of time and energy. Getting the basics right makes it easier for a board to undertake the hard work of providing true performance and management oversight and to adjust the priorities of both the directors and the organization. Generally, the key isn’t to do more but to focus more.” - The Dynamic Nonprofit Board, McKinsey Insights

To start building a more effective board, it is helpful to evaluate the boards performance, priorities, and function. Please CLICK HERE to download McKinsey & Company’s Nonprofit Board Self Assessment Tool - Short Form. For a more detailed assessment please CLICK HERE to contact us.

Building Breakthrough Boards - Step 4: Engage

Step 4: Engage
How can boards become more engaged in the success of an organization? How can we boost morale and excitement during meeting times and in-between meetings? How can individual board members bring their passions to the forefront and drive ideas?

These are several of the main questions that many organizations are asking. When a board of directors is producing results and moving in a forward direction morale will be high. Producing results is the basis of morale. When boards design a plan to support the strategic direction, then they have the roadmap to generate forward momentum and progress, leading to higher morale.

Effective board engagement is realized when board members are allowed to unleash their abilities and passions in the following three ways:

  1. Leveraging unique ideas and the individual desire to drive them to completion. Board members that care about the mission of their organization and the people it serves tend to generate all types of ideas for improvement. These ideas are critical for the CEO and Board Chair to cultivate because they are the #1 way to build engaged and excited board members to action. When board members feel they have ownership in the success of an organization through contributing their own ideas, then they will be committed to driving their ideas into action.
  2. Joining a committee that can leverage their expertise to support the growth, organization, and/or capacity building. Second to individual ideas, is the capability of the board member to fulfill a functional need for the organization. During the enrollment process in step 2, it should be made clear to the board candidate why they are being asked to join the board. If the board does not communicate effectively to the future candidate, it can lead to issues around expectations. Leveraging talents and skills in committees or task forces is an important way to boost participation. Board members should be asked to join committees where they can add value and utilize their unique capabilities.
  3. Representing the organization to the external world through being a strong steward and story teller. To build strong advocates and story tellers, board members need to experience the service and mission of the organization. Put board members into the shoes of the people being served to build a stronger understanding of the mission and program side of the organization. For example: if your organization serves the homeless, make sure your board members get to meet the individuals and families that are living in the shelters. Let the board members learn about the personal stories and journeys of the individuals being served, and build a reality to the obstacles and challenges they face finding housing, jobs, daycare, transportation, etc. These types of activities are what makes the mission real for most board members and inspires them to become powerful voices to the external world. 

Getting board members engaged requires the ability to connect the two different worlds of the boardroom and people being served. It is a process that requires attention to detail, relationship building, and planning. Keep board members engaged and managing their experience is not an easy task and can take a fair amount of time. Follow these three approaches and you can unlock the potential of board members and get them more inspired and engaged.

Building Breakthrough Boards - Step 3: Orient

Step 3: Orient
If you have successfully completed steps 1 and 2, you now have a group of excited new board members who need to learn more about the organization, determine how they can contribute, and get to know the other board members. Step 3, orienting the new board members, establishes the context for their experiences and ensures a positive first impression. The new board members have agreed to volunteer their incredibly valuable time, and it should be carefully and intentionally structured. In step 3 we will cover three things:

  • Approaching meeting #1
  • Assigning mentors
  • Engaging talents

Approaching meeting #1
The first meeting must make a positive and productive first impression. The board may be orienting and on-boarding several board members at a time. Regardless of how many new board members are attending, the meeting must be well scripted and organized. Many boards will host an orientation meeting prior to the start of the actual board meeting. It is highly recommended that the orientation be a separate meeting and standardized so that it becomes a turnkey operation in the future.

Orientation should not be just about providing information. It should also be a social initiation, enabling new board members to become acquainted with the CEO, existing board members, and other incoming members in a friendly environment. The new board members will be “drinking from the fire hose” in their orientation, so try not to overwhelm them with too much verbal information. The most important things for them to learn right away are who is on the board and what everyone does. 

A guidance manual containing key information should be distributed to each board member. It should include bylaws, strategic plan, board member job descriptions, board member contact list, committee responsibilities and members, attendance sheet (more on this next month), organizational chart, financials, important policies, and any other board training materials you may want them to learn. This is too much to cover in an orientation meeting, so it should be assembled and provided for review in advance. You can then further engage the new board members by pairing each one with an existing board member who will serve as a mentor.

Assigning mentors
If a board could do only thing as an orientation activity, that one thing should be to assign mentors. Consider the situation that new board members enter: they may not know many of their peers, may not have a grasp of what the organization does, and may be intimidated about speaking up for several meetings. A mentoring process will help to connect new board members with more seasoned board members and facilitate a deeper understanding of the organization and culture.

First, start by identifying the most suitable current board members to be mentors. Then assign each one to a new board member in a one-on-one relationship. The mentor will be tasked with sitting with the new member at all meetings, connecting with him or her between meetings, reviewing the board guidance manual with the incoming members, discussing the organization’s history, directing the new member to an ideal committee that can best leverage his or her skills, and being the point of contact for any questions.

The mentoring relationship should last one full year, by which time the new board member should be fully engaged and well informed. 

Engaging talents
New board members are asked to join a board because of the strategic value they offer to the organization’s future. Often we have seen new board members left on their own to figure out how to participate and where to engage. In the orientation process, leveraging the value of each unique board member must be undertaken intentionally. New board members do not understand the culture and potential ways to add value to it, so it is up to the board chair, CEO, and mentors to work with the new members and help them think through where they can contribute the most. This is a two-way conversation, in which the board and new members talk about their ideas for generating value and expectations. Use the skills and talents of the board members being enrolled to ensure that they are engaged to the fullest.

In next month’s nonprofit strategy report, we will discuss how to engage the entire board through meetings and committees.


Building Breakthrough Boards - Step 2: Enroll

In this Nonprofit Strategy Report and several to follow,  we will deliver insight into our 5 Steps for Building Breakthrough Boards.  The 5 steps are:

Explore: Finding the right board candidates (August)
Enroll: Ensuring a good match (September)
Orient: Harnessing passion and commitment (October)
Engage: Leading fun and exciting meetings (November)
Evaluate: Understanding how to succeed and produce (December)

Step 2: Enroll        
How do you ask someone to be on your board of directors? How do you know that they will be a good match? How do you know if they will be engaged? These questions can paralyze many CEOs and boards, preventing them from making progress by effectively recruiting quality candidates to join their boards.

In step 1 of Building Breakthrough Boards, we learned how to identify new board candidates who can best support the organization’s strategy. In step 2, we are going to reach out and make the ask. Boards may start with 20-50 names of prospective candidates on a list, which requires a process to vet and enroll them. This process can be broken down into three steps:

  • Vet the candidates
  • Meet with candidates
  • Ask candidates

Before you can start holding meetings with potential candidates, you need to have two things in hand. The first is an informational packet about the organization, which should include a brief overview and a board member job description. Second, you will need a process for vetting candidates to make sure that they are a good strategic match and have a passion for the mission of the organization. The vetting process can include a tour of the operations, meeting other board members, and/or questions about the candidate that will help members to better understand the individual and the potential future relationship.

Once the board has agreed on how to vet candidates, it is time to schedule meetings with them. Ideally, if the board engaged in step 1 by exploring prospective candidates, there should be a large list of potential candidates who match the organization’s strategic direction. Every board member should be assigned a handful of candidates to invite to a personal meeting. This will be a challenge because not every candidate will want to invest time in learning about the organization. Those who agree to a meeting might assume that the purpose is fundraising, and they may be pleasantly surprised when the topic of joining the board is raised. The first meeting is an opportunity to get candidates excited about the organization and to learn about their interests and passions by using the vetting questions. 

The enrollment process can take time because it is about relationship building. If you are reaching out to savvy candidates, it may take more than one or two meetings to gain an agreement to join the board. Be patient, persistent and resilient. When you feel that the candidate is a good match and demonstrates interest and passion about the organization, ask him or her to join the board. The ask can be as simple as: “Our board feels that you would make an excellent board member and have the expertise to support the strategic direction we are moving in. Would you be interested in being part of our journey and joining our board?”

Recognize that the process of building a breakthrough board can be quite lengthy. It can take a full year or more to add 4 to 8 new, high-quality board members, depending on the level of participation from the board and CEO.

The enrollment process can begin today for any board of directors. As with step 1, all that you need is the commitment and urgency of the entire board.

In next month’s newsletter, we will provide insight into how to orient new board members once they have joined the board.

Building Breakthrough Boards - Step 1: Explore

The business models of nonprofit organizations are changing fast, however the board of director's level of governance to match this shifting landscape is far behind the curve.

In this Nonprofit Strategy Report and several to follow, we will deliver insight into our 5 Steps for Building Breakthrough Boards. The 5 steps are:

  1. Explore: Finding the right board candidates
  2. Enroll: Ensuring a good match 
  3. Orient: Harnessing passion and commitment 
  4. Engage: Leading fun and exciting meetings 
  5. Evaluate: Understanding how to succeed and produce 

Step 1: Explore        
One of a CEO’s most important responsibilities is to ensure a partnership with the board for the purpose of consistently strengthening and growing the board. To achieve this, the focus should be on constantly exploring potential board candidates who could serve as catalysts for moving beyond the existing status quo. The concept that “water seeks its own level” aptly defines the importance of building breakthrough boards. To achieve the next level of growth, impact, and success, you don’t just want people who can settle in at your current level and maintain what you’re doing now, but people who can go up a notch, raising past performance levels to new heights.

For example: If a CEO of an organization with a $10 million budget whose operations are spread regionally across several cities and towns wants to break through to higher levels, then that CEO would want to explore potential board candidates who have experience in leading companies with budgets of $20+ million and geographic footprints at a state level or greater. The reason for doing so is that, to achieve this breakthrough, the nonprofit will need leaders who are experienced with higher levels of productivity and organization. The ability to achieve higher levels of success will come from the advice, resources, social connections, financial ability, and previous experience of those candidates who have “been there, done that.”

The process may not be very complex, but it does require the board to commit to these three points:

  • The existing board must understand and accept the need to change and evolve, so that they are committed to and engaged in the process of change.
  • Board development must be a key area of focus of all board meeting agendas, with a dedicated governance or nominating committee leading the charge. This will ensure a consistent, organized, and disciplined approach.
  • The board should have a clear understanding of where the organization is and where it wants to go in terms of its size and scope. This is the single most important issue in building a breakthrough board. With this road map in hand, the experience and expertise of the new board candidates can raise the entire organization to new levels.

The exploration process can begin today for any board of directors. The only prerequisite is commitment and urgency from the entire board. Having a transformational strategic plan can help to guide board-building discussions, and a list of names can be generated using the future vision and direction contained in this plan as context. 

In next month’s newsletter, we will provide insight into how to enroll new board members once you have identified potential candidates.

Building Breakthrough Boards

The business models of nonprofit organizations are changing fast, but boards of directors are far behind the curve in making governance changes to keep up with the shifting landscape.

We are seeing massive disruption in every nonprofit sector due to technology, regulations, and many other factors. Donors and foundations have been trying to encourage nonprofits to prepare for this disruption for the last 5-10 years. Unfortunately, the pace of change in all nonprofit sectors is very slow. Donors and foundations have been trying to influence change through their grant-making strategy, but that too has been slow to evolve. The trend is moving away from small ($2,500-$5,000) grants to larger, more impactful gifts. With the increasing average grant size comes a decrease in the total number of grants available, making competition for grants tougher than ever.

Funders are also looking to ensure that nonprofit organizations will remain viable in the years to come. As a result, many of them are focusing more heavily on the following four areas as part of their giving strategies:

    1. Mergers, collaborations, and shared services: Large numbers of nonprofits are fighting for the same philanthropy. These organizations must find ways to work together with other like-minded nonprofits to leverage talent, share resources, and improve cost-effectiveness.

    2. Business model changes that integrate technology: Greater capacity, better resource management, and improved service can come from technology solutions, which must be adopted at a quicker pace.

    3. Ability to measure impact and capture data: Nonprofits must be able to clearly quantify how their programs are moving the needle and fulfilling their mission. They must establish credible metrics and capture reliable data to support higher-quality decision making.

    4. Building capacity to ensure a strong and capable workforce: Funders recognize that nonprofits need to attract talent to achieve their mission. Most organizations are stretched very thin with staffing resources to tackle new initiatives.

These shifts in funding strategy are not enough to fully drive change. Nonprofit organizations must take on the challenge of becoming more dynamic in the rapidly changing marketplace. This journey begins by building a breakthrough board of directors capable of aligning their organization with future realities.

Great nonprofit organizations build great boards. Boards can either maintain the status quo or lead their organization to new levels of governance, management, and achievement. It is more important now than ever for nonprofit organizations and their boards to be dynamic and adaptable. The boards of the future will need to be more capable, savvy decision makers and stronger players in driving change and adaptation. Boards must be able to think beyond traditional governance to ensure the viability of their organization. 

In the coming five blog posts (August–December), we will deliver insight into our 5 Steps for Building Breakthrough Boards, starting with step 1 in August. The 5 steps are as follows:

  • Explore: Finding the right board candidates 
  • Enroll: Ensuring a good match 
  • Orient: Harnessing passion and commitment
  • Engage: Leading fun and exciting meetings 
  • Evaluate: Understanding how to succeed and produce 

Board Committee Overload

Is your board overloaded with committees? Do you have board members on 2-4 different committees? How effective can volunteers be if they are being overloaded from day one! 

We have seen organizations with 9-10 board members and 11 committees. Who would want to try to keep up with those demands as a volunteer? It is a recipe for disaster. Boards should consider having three to five committees depending on the size of the board. Our suggestion is to have three core committees, which are summarized below:

This committee is dedicated to discovering, enrolling, on-boarding, engaging, and succeeding board members on a consistent basis. This committee must also ensure participation, assess board performance, and hold other board members accountable to their commitments, and attendance.

The finance committee ensures proper asset manage, adequate reserves, financial oversight, budget capacity, and surplus investment. This committee should also be forecasting potential financial opportunities and threats based on the developments that reveal themselves from implementing strategy.

This committee monitors the outcomes and progress of the existing strategic plan to hold the board and CEO accountable to success. The committee also continuously plans beyond the current time horizon in the existing strategic plan. They also must ensure adequate resources through continuous philanthropic efforts to be able to provide the funds necessary for the CEO to carry out the strategic plan.

These are the three most important committees, and one could argue, the only ones needed for a nonprofit board. Some boards do utilize an executive committee, and in our experience, this tends to become a board-within-a-board, and can alienate general board members. There is no need for this type of committee in most organizations, just like there is little need for having 5-10 committees on any one given board of directors/trustees.

Think strategically and start to whittle down or phase out the number of committees your board has, and watch production and engagement increase.