Executive Committees: To Be or Not to Be?

photo (6)By Robin Hindsman Stacia, BoardSource senior governance consultant; principal, Sage Consulting Network, Inc.

Not to be? Many of you may think that questioning the relevancy of the executive committee (EC) crosses a sacred line. If you do, it’s because somewhere along the way, we’ve allowed our executive committees to become sacred groups with the ability to make limitless decisions and act in lieu of the board’s full participation. And when I say “we,” I mean board members. Our executive committees didn’t take this level of power by force or coercion; rather, we have been giving away this power so we can do less! There, I’ve said it: Board members allow the executive committee to cover for their lack of engagement.

Just hold your horses, you say: Executive committees have the authority to act on behalf of the board, and they are a common standing committee. According to Leading with Intent: A National Index of Nonprofit Board Practices, 78 percent of boards have executive committees, making them the most prevalent of all committees reported. Surely, 78% of nonprofit boards can’t be in the wrong!

Okay, maybe there are a few effective executive committees out there, but, in many more cases than we hate to admit, our executive committees are what were intended to be a good practice gone wrong. And I’m not alone in my desire to see them ‘not be.’ In the May 26, 2011 issue of The Nonprofit Quarterly, Simone P. Jayaux defiantly declared, “I’m on a worldwide mission to destroy all executive committees.” Why? Because board disengagement — something many, many boards struggle with — can be worsened by the presence of even a halfway functional executive committee. And, as the board’s engagement deteriorates, the executive committee grows in strength, becoming the de facto board and undermining the legal and statutory responsibilities of the full board.

If you’re among the 78 percent of boards that have an executive committee, the full board must retain its position as the primary authority for the organization and take steps to ensure that your EC doesn’t exceed its boundaries. There must be full transparency between the deliberations and decisions made by the EC and the full board. The take-away here is that board members can’t delegate their responsibilities, fall asleep on the job, and fail to maintain full engagement and accountability.

The following are some practical actions that will help your board improve its executive committee processes:

  • Consider if your executive committee is necessary for your board. Not all boards require an executive committee, and each needs to consider the added value and if the EC’s responsibilities could be handled by other committees or perhaps the board’s officers.
  • Make sure the bylaws detail the specific scope of responsibilities for your EC, clearly state the membership, and indicate when the EC’s decisions must be confirmed by the full board. The more structure the better — limit flexibility. Clearly identify what the EC should not do.
  • Use the EC to vet ideas and options for full board discussion, not decision making.
  • Ensure that there is a process in place for full board review of EC minutes and actions.
  • Consider the appropriate meeting frequency for the EC. Consider having this committee meet only when necessary and not routinely, which will minimize the possibility of diluting board responsibilities. Executive committees that meet more frequently are prone to doing more work — work that might be better delegated to other committees, your board officers, or even management.

Executive committees: To be or not to be? Emerging governance trends suggest that we change or eliminate our executive committees. That means we need to rethink business as usual and engage in an honest evaluation of the impact of our executive committees on our boards. Are we, as board members, enabling board disengagement by allowing our executive committees to make decisions for us? If so, it’s time to reengage and take back our power.

Is Your Spending Rate Sustainable?

boards_blog_imageBy Heather Myers, managing director, non-profits, Russell Investments

As a board member, you have a difficult job. You need to ensure that your organization has the money, talent, experience, and resources to fund your mission. And you need to do this in an ever-changing environment. Additionally, if your organization relies heavily on your investment program to meet your spending needs, it has become essential that your board fully understands how to effectively manage that program.

Forecasters expect the inflation-adjusted growth of a passive portfolio of stocks and bonds to fall to 3.3% over the coming 10 years — a level that would make supporting even a 5% spending rate unsustainable. What this means is that nonprofit fiduciaries are going to have to think differently about how they go about meeting their return objective. The good news is that while the outlook for market returns has declined, there are still ways to improve portfolio returns.

Here are five strategies my Russell Investments colleagues and I suggest nonprofit fiduciaries embrace going forward:

  1. Be nimble. Gone are the days when you can set and forget your strategic asset allocation (your long-term policy allocation to all asset classes and sub-asset classes). Markets are fast moving and increasingly complex; you need to be fleet of foot to capture evolving market opportunities.
  2. Be mindful of your spending policy and evaluate it annually. Know how much your organization draws from your investment portfolio to meet your spending requirements and, unless you have a legal requirement to spend 5% annually, ensure that you don’t overspend and evaluate the planned spend at least annually.
  3. Manage your liquidity. Spending policy and liquidity go hand in hand. A sound liquidity program means aligning the liquidity profile of your investment portfolio with your time horizon and cash-flow demands. If you do that, it can help you meet your spending obligations as they come due, while reducing the risk of mission-threatening investment losses.
  4. Manage risks holistically and assess your risk tolerance. Focus not just on investment risk, but also on governance issues and other aspects of risks. Ultimately, you need an investment approach that can deliver the returns you need at a level of risk you can survive.
  5. Take an organization-wide perspective. Be aware of the impact your investment program has on your organization’s ability to achieve its broader goals.

It’s important to realize that these strategies don’t operate separately; prioritizing one will have an impact on the others. At some point, you will need to decide which of these is most important to your organization, and then manage the rest accordingly. For example, if your spending target is high, and you do not have a high tolerance for risk, you may need to rethink your spending target. Having a firm understanding of these strategies and how your board wants to prioritize them is essential to effectively managing your investment program.

Does all of this sound complicated? While it wouldn’t be fair to say that it is not, Russell Investments has a new resource that we think will help, and that is available free of charge to the BoardSource community. The Non-profit Fiduciaries’ Handbook is a step-by-step guide to investment strategy for nonprofit investors. It discusses each of the above strategies and includes worksheets you can complete with your investment team or questions you can ask to prompt discussion. To request a copy of The Non-profit Fiduciaries’ Handbook, click here or visit www.russell.com/nphandbook

The opinions expressed in this material are not necessarily those held by Russell Investments, its affiliates or subsidiaries. While all material is deemed to be reliable, accuracy and completeness cannot be guaranteed. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.

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Adaptive Strategic Planning for Today’s New Normal

blog-imageBy Ann F. Cohen, chief strategist and change agent, Ann Cohen & Associates; BoardSource senior governance consultant

Do you remember that childhood game called “Freeze”? If only we could play it now with the world in which our nonprofits operate. “Freeze,” I’d yell, when it comes time to create a strategic plan — “Stop moving, we have to plan.” After all, setting direction for the organization is one of the board’s primary responsibilities. But no, there’s no freezing the world today. The “new normal” is change — fast paced, constant, and, at times, unpredictable. In fact, organizations that do attempt to stop the world while creating a strategic plan usually end up with credenza ware — a document that sits on the credenza collecting dust until the time comes to create another plan.

It’s not surprising to me that BoardSource’s new study, Leading with Intent: A National Index of Nonprofit Board Practices, found that boards are doing only a mediocre job at monitoring programs and setting direction. It’s hard to do when the external environment in which our organizations operate won’t stand still for a moment.

In today’s new normal, the key to successful strategic planning is to do a little changing ourselves — to approach strategic planning not as an event or a means to an end but rather as a dynamic, ongoing learning process or cycle.

The process begins with board and staff co-creating an aspirational vision that answers what has become the iconic and ubiquitous Gandhi question: What is the change we want to see in the world? From there, it moves forward with intentionality.

Learning occurs in many ways:

Questioning our board and staff members, clients, and important thinkers, funders, and partners (via interviews, surveys, and today social media as well) and truly listening to what they say, being mindful of our own biases. I recommend the following two lines of inquiry:

  • Strategic impact questions that go directly to what the organization has been doing: What is our core work? How well is our organization performing — programmatically, financially, and administratively? Are we making a difference? How do we know? Who else does our work, and are we competing for the same funds?
  • Generative questions that look at the work of the organization from a different angle: If we do X, what will we look like? What is the biggest gap between what we claim we are and what our actual performances or actions say we are?

Assessing: Did we reach our goal? What stood in the way? What propelled us forward? What measures support this assessment?

Researching: What do relevant studies — whether trend analysis, demographics, or research — tell us about the changing landscape (economic, social, and environmental) in which the organization operates?

Transforming knowledge into action: By asking strategic and generative questions, listening, assessing, and researching, we surface the needs, possibilities, strengths, weaknesses, opportunities, and signs of caution that should be addressed as we design our plan — one that we believe (based on our learning) and hope (based on our passion) will propel the organization toward its vision. As we identify and choose between different design elements or strategies, we know that nothing can be set in stone; our strategies must be adaptive to the changing reality, lend themselves to effective monitoring, and remain relevant and imperative. And if we later discover through monitoring that we aren’t meeting our strategic goals, then we ask more questions, we learn more, and we apply that learning to our design. Amending a design, a course of action, a plan, should become part of the board’s culture and ongoing oversight responsibilities.

Read the full post »

Make Informed Fundraising Decisions

if-blog (4)By Ron Wormser, lead author, Informed Fundraising: An Introduction & Guide               

“Why does the world need yet another book on fundraising?”

I was asked this question by a friend who is a long-serving senior staff member of a community foundation. Throwing caution to the wind, I answered her question with another: “Do all the nonprofits in your community raise the money they need?” After a slight pause, she answered, “No, they don’t.”

The sad reality is that too many nonprofits are unable to raise the funds they need to maintain current programs and services let alone serve all the others in need. Yes, some nonprofits have staggering fundraising success. But most often they are large, well-established organizations with years of accumulated fundraising experience and abundant fundraising expertise and resources — organizations like large private universities and hospitals.

But most nonprofits are not large (according to Urban Institute’s Nonprofit Almanac 2012, almost half of all public charities have annual expenses under $100,000) and have limited, sometimes very limited, fundraising experience and even more limited current fundraising expertise and resources. Yet it is the smaller nonprofits that are typically the most dependent on contributed funds, as are those they serve, and that have the hardest time raising needed funds.

There can be many reasons why smaller nonprofits have limited fundraising success. Based on my experience working with community-based nonprofits, one major reason has become painfully apparent to me: Large, established nonprofits can 1.) easily attract community members to board service who have experience with fundraising as well as personal resources and access to others with discretionary resources, and 2.) afford chief executives with years of fundraising experience. In contrast, smaller nonprofits have access to different pools of prospective board members and chief executives. Their board leaders are likely to be less experienced in fundraising and less informed about what it takes to do it well.

Many who are new to nonprofit board service think that fundraising is about writing a big check and asking their friends to do the same. That perception, that misunderstanding, could well be the single most significant reason why smaller nonprofits struggle to raise the funds they need.

Consider an alternative, where fundraising efforts are based on the following:

  1. A clear understanding of what is required to be effective in raising money so that whatever fundraising efforts are authorized are well-conceived.
  2. Carefully prepared fundraising plans, strategies, and goals supported by necessary capabilities that reflect the unique needs and circumstances of the nonprofit, resulting in a well-planned program.
  3. Competent and consistent implementation of the plan by those qualified for the tasks, resulting in a well-executed program.

Fundraising based on those three components is almost always highly effective in achieving the desired results, and is what I refer to as “informed fundraising.”

Informed Fundraising: An Introduction & Guide is not another “how to” book. Rather, it is designed to provide nonprofit decision-makers associated with small nonprofits with the information they need to make informed decisions when presented with proposed fundraising plans and programs. It provides them with the understanding needed to ensure that those plans and programs have been carefully prepared and will be well executed.

Learn more about Informed Fundraising: An Introduction & Guide.




Boards: A View from the Corner Office

leading-blog-imageBy Marla J. Bobowick, MBA/CNM, senior governance consultant, BoardSource; author, Leading with Intent report

While we live in volatile, uncertain, complex, and ambiguous (VUCA) times, nonprofit boards have changed only modestly. The findings in Leading with Intent: A National Index of Nonprofit Board Practices show some progress over the past 20 years. We have gotten smarter about boards, but only incrementally.

Reading between the numbers, boards could be so much better and add so much more to their organizations. I can’t help but believe that board members need to take greater ownership of their governance structure, practices, and behaviors. But, I also believe that CEOs bear responsibility for some gaps in board performance.

On average, a CEO spends 17.8 hours per month on board work. While I’m not sure if this is good or bad news, I do know that a CEO’s time is a precious commodity. What follows is some little data that highlight big ideas for CEOs to gain greater value from their boards.

Do you have the dream team board?

If you’re one of the 73 percent of CEOs who believe you have the right people on your board, congratulations! My experience, however, suggests that we should take this number with a grain of salt. Many CEOs and boards are still in search of the dream team board. One of the obstacles may be a lack of agreement between CEOs and boards on the desired team players. Passion for the mission tops the list for both, but board chairs rank professional skills second while CEOs rank community connections second.

What might explain the difference? CEOs often have a large Rolodex of contacts with knowledge and expertise in a wide range of relevant areas. But, they can’t be everywhere and know everyone. CEOs want and need board members to serve as ambassadors, to extend the organization’s reach, to speak out and up as dedicated volunteers in places and ways that the CEO — who, while a subject matters expert, is also a paid professional with a vested interest in the outcome — cannot. There is no substitute for well-connected, influential board members with different networks and platforms.

Consider This: When the full board and CEO of a social service agency brainstormed the dream team board together, they realized that they had connections to some ideal candidates who might have otherwise been presumed to be out of reach for the organization.

How do your board members know what the work of your board is?

Eighty-one percent of nonprofits have a written job description for board members, 66 percent of CEOs report that their orientation process is effective, and 65 percent of CEOs believe their board members are well informed of their governance responsibilities. While written statements of board roles and board members expectations, board manuals and formal orientation sessions are important starting points, they are only the first steps toward meaningful board engagement.

As Dick Chait [co-author of Governance as Leadership] has observed, “Governance is a rare and unnatural act.” Board education requires a genuine commitment to continuous learning (about the organization and about governance), strategic information sharing, and mutual feedback. Best practices for board development range from a simple, on-the-spot board meeting evaluation to a more comprehensive board assessment. Fifty-one percent of boards have undertaken a formal, written board assessment within the past three years, and their performance was rated higher by CEOs than boards that had not.

Consider This: The board of a professional association invites the incoming board members to the last meeting of the outgoing board members. As part of the onboarding ritual, together they review the results of the annual board assessment and identify board priorities for the coming year.

Do you engage the board in what matters most?

I hear, repeatedly, from CEOs that they want the board to see the big picture, own the mission, and act with a “we mentality” about the organization. Yet, many board meetings do little to encourage this. Seventy-five percent of CEOs report that half of their board meetings are spent on staff and committee reports. Only 35 percent of CEOs report that meetings focus on strategy and policy, rather than operational issues.

This Leading with Intent data — along with observations over the years — suggests that board members may not have enough input and interaction with the organization’s strategic direction, priorities, and issues — all of which the CEO and professional staff deal with on a daily basis. But, for many CEOs, sharing strategic leadership with the board is daunting. Only 42 percent of CEOs strongly agree that they involve the board in leading the organization. A college president — who felt he had a great board composed of smart, dedicated, generous people — confessed, “I struggle with the knowledge that I don’t bring the really difficult strategic challenges to board meetings.”

Consider This: At the end of the meeting, a board member described a disappointed exchange he had with the health care organization’s staff. The CEO acknowledged the problem and promised to bring the issue back to the board. At the next meeting, the board examined the results of a customer satisfaction survey, and the CEO was able to glean valuable lessons learned from board members who had worked through this issue in corporate, government, and direct service backgrounds.

Do you have the board you deserve?

As a CEO, if you have a great board, it is not by accident. I suspect you’ve spent a lot of time building relationships with your board members, asking them not for their support and approval, but listening and learning about their interests and concerns. If your board doesn’t get good grades, you may be — unintentionally or otherwise — contributing to the problem. Perhaps you flood them with 120-page board meeting PDFs in the interest of transparency. Maybe you keep your distance out of respect for their very busy professional and personal lives. Take a few of those 17.8 hours per month and dedicate them to learning what your board members think about what’s working well and what could be better. See what happens when you take this one small, intentional step toward a better board.

How to Get Beyond B-Minus: The State of Nonprofit Boards Today

leading-blog-imageBy Anne Wallestad, BoardSource president & CEO

Today, BoardSource launched Leading with Intent: A National Index of Nonprofit Board Practices, which is a comprehensive scan of current nonprofit board practices, policies, and performance. While there is lots of good news to share, the bottom line is that nonprofit leaders give nonprofit boards a “B minus” grade in overall performance. Leading with Intent explores why that is, and — more importantly — what we can do about it.

Here are a few of Leading with Intent’s key findings, and some advice about how we can get beyond B-minus:

Getting the people right is fundamental: Leading with Intent finds that if a board isn’t thoughtfully composed as it relates to skill sets, leadership styles, and diversity of thought and background, it is less likely to excel in other areas of board performance. But unfortunately:

  • Only 1 in 5 chief executives strongly agree that they have the right board members.
  • 58% of chief executives say it is difficult to find people to serve on the board — up from 44% in 2012.
  • Board diversity has improved slightly, but a full 25% of boards remain exclusively White.

       What boards can do:

  • Make strategic board recruitment a priority. Make sure that your recruiting efforts are connected to your overall strategic vision and plan, and that you’re thinking through the skills, backgrounds, and networks you need to have as a part of your board’s composition. For step-by-step guidance on strategic board recruitment, check out BoardSource’s Board Recruitment Center.
  • Structure yourself for success. If your board doesn’t already have a governance committee responsible for leading and managing board recruitment and performance, consider creating one.

Boards need to get outside of their comfort zones: Leading with Intent finds that boards do well at functions related to compliance and oversight, but face challenges with their strategic and external work. In an operating environment that is characterized by constant change, this is a wake-up call: Boards need to get outside of their comfort zones and provide stronger external leadership — especially in fundraising and advocacy — that enables their organizations to adapt and adjust to change.

       What boards can do:

  • Set strong expectations. When talking to current and potential board members, be clear about the important external role that board members need to play in supporting your mission. Make sure that each individual board member is comfortable reaching out to his or her networks and spheres of influence, whether it’s about policy decisions that impact your mission, charitable support that you need to fuel your work, or community partnerships that you could build to magnify your impact. For more on the important role that board members can play in advocating for their missions, visit standforyourmission.org.
  • Celebrate success. One of the secrets to engaging board members in activities that they may be nervous about is to thoughtfully celebrate successes whenever they take place. It reinforces how important those activities are, and creates pride of ownership and positive peer pressure within your board’s culture.

Investments in board development are worth the effort: Building and strengthening a board takes ongoing, intentional effort. Leading with Intent explores the pain points that many boards are experiencing, and highlights the important role that board self-assessment can play in improving board performance.

       What boards can do:

  • Get serious about board development. Challenge your governance committee to craft a holistic board development program for your board, with thoughtful goals around recruitment, orientation and education, regular assessment, and board succession planning. BoardSource’s year-round board development for organizational members provides a great foundation for this work, including an annual assessment tool.
  • Share your commitment to strong board performance. Organizations that take board leadership and governance seriously are stronger and more sustainable, and that’s something that donors and the public care about. Take a moment to share your board’s commitment to essential board leadership practices by updating the “People & Governance” section of your GuideStar Exchange Profile.

If we want nonprofit organizations positioned to deliver the kind of impact and results that our world needs, then B- boards aren’t going to cut it. We need to focus our energies and resources to support boards that are working diligently to strengthen their performance, and we need to challenge those that are not to set a higher bar for themselves and their missions.

We need our boards to strive to be A+ boards. That’s what our missions need, it’s what they deserve, and it’s what is within our reach if we commit to making it happen.

Passion is Not Enough!

photo (4)By Chris Grundner, president and CEO, Delaware Alliance for Nonprofit Advancement

Are you familiar with Maslow’s Hierarchy of Needs? Abraham Maslow, a psychologist, introduced the concept in a 1943 paper, stating that people are motivated to achieve certain needs. When one need is fulfilled, a person seeks to fulfill the next one, and so on. The needs are often depicted as levels within a pyramid, with the largest, most fundamental levels of need at the bottom — things like food, water, shelter, sleep. Meanwhile, at the top of the pyramid, is self-actualization — most often explained as understanding what your full potential is and then actually striving to realize it. To borrow a phrase from the U.S. Army, self-actualization is “being all you can be,” which should be our ultimate goal.

In a talk I gave recently at a TedxWilmington event, I shared what I consider to be the key ingredients to building an excellent board, and to emphasize my point, I contrasted these building blocks to the steps in Maslow’s Hierarchy of Needs. In building my parallel pyramid, I set forth that passion for an organization’s mission is the equivalent of the bottom rung on Maslow’s pyramid. Combine passion with regular attendance at board meetings and organizational events and making meaningful financial contributions to the organization on a regular basis, and you’ve got a base from which solid governance can be built. But they alone are clearly not enough to help the board be all it can be…or even to facilitate long-term organizational sustainability, for that matter.

So what comes next in my pyramid? I invite you to view the video of my talk to find out.


Look Out, Nonprofit Sector! Here I Come!

photo (4)By Jana Murdock, assistant to the director, Kopper Top Life Learning Center, Liberty, NC

Jana Murdock is one of 15 emerging nonprofit leaders who attended the 2014 BoardSource Leadership Forum in early October as a Judith O’Connor Memorial Fund Scholar. Her conference learnings are the focus of her comments here.

The recent BoardSource Leadership Forum was quite an experience!  As a novice in the world of governance, I was amazed at the resources and support that are available to make nonprofit boards something worth having.

I was excited to learn the basics of building a board, finding out what kind of people you might need, and what they should be doing.  I spent a lot of time at sessions learning about the relationship between the executive director and the board — this is such a fragile connection, especially if the ED is also the founder…which mine is!  Building that relationship, strengthening it to the point where neither side feels threatened and everyone is able to contribute: That’s my goal.  It’s lofty, this is true, but the most effective nonprofits have solid leadership, both in the day-to-day operations and in the oversight and long-term planning realms.

As one of the leaders of a very small organization, my first step will be clarification.  We need to determine how many staff we need, what their roles should be, and how they will be funded.  To begin this process, we need to separate out executive director tasks from operations tasks from maintenance tasks…the list goes on and on.  With only 1.5 staff, you can imagine how muddy those waters have gotten!

Once we have that figured out, we need to decide who wants to do what.  My ED is basically doing everything, but it’s time to figure out what it is she actually likes doing, and what role she wants to assume when we start hiring more staff.  As she works through that process, we will be able to discern what roles actually need to be filled, and prioritize them.  At the conference, I learned that evaluations can be an extremely useful tool for this!

The board is, of course, an integral part of this process.  Before we can do anything else, we need to look clearly at the board and see how it is operating now and decide how we would like it to operate in the future.  Although the members are doing a lot of hands-on work at the moment, which is fine for a start-up, we need to develop a plan to transition them into the oversight role.  Hiring more staff is a certainly a part of this process.  The board should help find funding to hire these people.

It’s a big job!  I’m trying to transition my organization from a start-up to a growing organization.  I was able to get a much better handle on what needs to happen and how at the conference.  I feel much more confident going forward and talking to my board now that I have some solid knowledge!  I’m looking forward to this chance to help my organization grow!

Interested in learning more about the Judith O’Connor Memorial Fund Scholarship program? Click here.

Fiduciaries are Only Human

photo (4)By Heather Myers, managing director – nonprofits, Russell Investments

As a board member, one of your most important roles is to serve as a steward and fiduciary of your organization’s assets. We all know this is crucial. Without assets, your organization, and the great work you do, wouldn’t exist. Over the years, working with nonprofits, I have learned some important lessons about what it takes to be an effective fiduciary. It can be easy if you follow three simple rules:

  1. Set clear objectives.
  2. Don’t try to predict your future results based on your past performance.
  3. Focus on the big picture.

BUT, there is one problem holding us back. We are human. And as humans, sometimes we are distracted by things that aren’t important. Or our behavior doesn’t match the environment we are in. Or we have so many built-in biases that we are frequently trying to second guess the markets and ourselves. And sometimes, we make rash decisions. These behavioral biases have been so well documented that the Nobel Prize winning economist, Daniel Kahneman, focused much of his work on the psychology of decision making.

Despite knowing that simply being human can result in bad decisions, no one really believes that they actually behave like this. The recent market turmoil is a good example. If everyone is selling, you follow-suit (the bandwagon effect or group think), and this kind of behavior doesn’t always pay off. We have seen some volatile days and plenty of concerning news in the markets stemming from crises like Ebola to conflicts in Ukraine. We obviously cannot stop being human, and we can’t always control our environment, so what can we do?

We can try to follow those three simple rules. First, establishing clear objectives does make a difference. Prioritize what is most important to your organization and focus on that. For instance, if your organization is truly a long-term investor and has taken the time to go through a detailed asset allocation study and that allocation meets your long-term objectives, then stick with it. Don’t set conflicting multiple objectives, which, as humans, we are tempted to do; we aren’t good at managing to that.

Second, for years, studies have shown us that past performance does not predict future results, and yet our gut, our emotions tell us otherwise. You see a winning streak and you want to try and capture it — this is extrapolation bias, inferring the future from past results. Academically, we have been shown that this is not a good way to invest, and yet human behavior leads us down this path.

Third, as a fiduciary, you need to stay focused on the big picture. Have faith that those in charge of managing your assets are keeping track of the small details. Your focus shouldn’t be on individual stock holdings or day-to-day movements in the portfolio; you should remain focused on whether the portfolio is operating within established risk parameters, the asset allocation is within bands, and your total portfolio is expected to meet objectives. The reports you look at should be focused on these critical items, which can help you avoid many of the other behavioral biases that humans fall prey to.

For fiduciaries, it’s important to recognize potential biases and employ processes to protect from these behaviors. We need to manage our ingrained tendencies to deliver better outcomes. By setting clear objectives, staying focused on the big picture, and not making decisions based on past results, you should have a better chance of growing your portfolio and providing long-term funding for your organization.

BoardSource thanks Russell Investments for its sponsorship of the 2014 BoardSource Leadership Forum.

Bench Warmers or Change Makers?


by Robert B. Acton, executive director NYC, Taproot Foundation

Earlier-career professionals are a valuable — and largely untapped — talent pool for the boards of directors of nonprofit organizations in our country. As a sector, nonprofits are leaving a powerful resource — energized and ready-to-serve business professionals — sitting on the sidelines.

The push to create diverse nonprofit boardrooms is well-known, but diversity related to age often seems to be left out of the equation. According to BoardSource’s Leading with Intent 2014: A National Index of Nonprofit Board Practices, just 17 percent of nonprofit board members are under the age of 40. Moreover, with only six percent of nonprofit chief executives under the age of 40, the truth is that most nonprofit leadership happens in a generational vacuum. The hard truth is that nonprofit boards do not reflect the full spectrum of America’s professional workforce. While the business world is obsessed with understanding and responding to Millennials, our sector is doing little to engage this impressive generation in leadership.

The primary reason for this neglect, as I see it, is clear.

As a group, earlier-career professionals don’t have deep pockets to make as sizable an annual contribution as their more mature counterparts. As a result, they rarely make board prospect lists. That’s a big mistake. The annual financial gift a board member donates can be just a fraction of his or her overall contribution. The strongest nonprofit organizations in our country enjoy board members who leverage their professional knowledge, skills, and network to support their nonprofit organization’s business infrastructure. My organization — Taproot Foundation — strongly believes that every nonprofit needs professionals with a range of functional skills serving on its board to provide oversight, strategic guidance, and pro bono resource-raising in at least six key areas of expertise: legal, finance, technology, marketing, human resources, and strategy management.

Beyond their business skills, Next Gen board members can bring new perspectives to governance: the importance of connectedness, purpose, and recognition; shifting attitudes on workplace flexibility; and use of new technologies and social media, to name a few. Earlier-career professionals also tend to enjoy large networks of colleagues and friends eager to make a difference and engage in their community. At the end of a long workday, young professionals often head to networking events, professional affinity group meetings, or the local pub: rooms full of likeminded individuals, all of whom have the ability to infuse energy and enthusiasm into the governing work of a nonprofit.

In 2014, I led the design, build, and pilot of a board placement program at Taproot to place Next Gen leaders on boards and, in turn, train them to drive pro bono resources into their nonprofit. Generously funded by the Heckscher Foundation for Children, the program recruits, matches, and trains earlier-career professionals from PwC, Google, and Alcoa with youth-serving nonprofit organizations in New York City. We are now working with PwC to expand the pilot to five new regions: Chicago, San Francisco, Los Angeles, Washington D.C., and Atlanta.

In building any new program, one always wonders, “Will anyone come to our party?” My first worry was this: “Will nonprofits want early-career professionals on their boards?” It turns out the answer to that is a resounding “yes.” We reached out to 90 youth nonprofits inviting them to learn more. Fully one-third of those organizations applied for participation in the program. My second worry: “Will earlier-career professionals want to serve on nonprofit boards and will they commit to hours of pro bono training?” Once again, they far surpassed our expectations. We presented the opportunity to 110 professionals from these three companies and nearly half submitted an application for board placement. The bottom line: Earlier-career professionals and nonprofit organizations are eager to connect, provided the value proposition is clear.

To accomplish the transformative change of infusing Next Gen board members into nonprofit organizations, three key things must happen:

  • Nonprofits must be convinced. Nonprofit leaders must understand that earlier-career professionals can do much more than make an annual contribution; they can drive tens-of-thousands of dollars in pro bono value into the organization each year.
  • Nonprofits must be ready. For board members to effectively leverage their talents and network, nonprofit leadership and staff must understand basic principles of how to effectively scope, secure, manage, and scale pro bono for maximum impact. Taproot Foundation offers tools and training to help nonprofits become powered by pro bono so they can effectively leverage these resources, independently and sustainably, in highly impactful ways.
  • Next Gen board members must be trained and supported. These new board members need training to ensure that they will succeed both as stewards of the organization and drivers of resources. Moreover, because they may be “the odd men out” as the youngest members of the board, I believe they will benefit from a cohort of similarly situated professionals going through the same experience at the same time.

Over the past 11 years, I have served on a number of nonprofit boards — my first at the age of 34. While I enjoy participating in quarterly meetings, serving on committees, attending the annual gala, and the like, the truth is that I have been most useful to my organizations when tapping into my professional skills or network to drive in much-needed capacity building. I’m most fulfilled when I know I have truly added value in meaningful ways. I’m most appreciated when I’ve helped the executive director overcome a challenge the organization was facing.

Let’s get 20- and 30-somethings off the bench and onto the field. The nonprofit sector needs their leadership.




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