Recently, there have been several significant board challenges arise in nonprofits in our area. In the three cases highlighted here, the future of the organization may be in actual jeopardy. And for the many people who rely on the services these agencies provide, a huge hole could suddenly appear in the community’s social safety net.
(In the following examples, I use the term ‘ED’ to represent the employee in the organization that was hired by the board to run it.)
Nonprofit One
After many years, the ED resigned and moved on to a better offer. The board of directors decided to have one director put together a job description that would accurately reflect the job and conditions of employment. To save money, the board also did the posting and interviewing through a hiring committee of the board. The posting didn’t mention financial skills as the organization had an excellent Controller in place. And there was no focus on financial experience in the ensuing interviews. This nonprofit is in the social services sector, so a lot of energy went into getting the right fit between the ED position and the social workers in the office.
The successful candidate was a social worker from a provincial government agency.
One of the directors recently voiced concern about the number of staff turnovers that were occurring in the office. Another wondered aloud about the lack of financial information coming to the board.
After four months, the Controller quit and went to work elsewhere, citing the inability to work with the ED as the cause of his leaving.
The board has become aware that the financial situation is serious and is searching for a quick solution before they may need to face shutting down this decades-old charity.
Nonprofit Two
Another nonprofit had a key employee leave and then file a grievance of constructive dismissal against the organization.
The ED doesn’t like confrontation and when an employee came with an accusation of bullying, the ED suggested that they should wait and see if it would die down. When it happened a second time, the employee wanted to talk to the board about it and was refused that opportunity. The ED talked to the bullying employee who denied that anything had occurred.
When a third episode took place, the employee gave notice and went to a lawyer. Apart from other routine board challenges, the nonprofit received the constructive dismissal letter from the lawyer only days after she left the organization.
This nonprofit is small and has no monies to even employ its own lawyer to deal with the issue. The settlement of this case could easily destroy the nonprofit.
Nonprofit Three
Nonprofit Three has recently hired a new ED. The new ED has found that much of the financial information provided to the board of directors in the months leading up to his hire may have been mostly fictional. The organization’s finances are in disarray and drastic action will have to be taken quickly to stave off shutting the doors permanently.
This nonprofit’s board challenges didn’t include finance as the board wasn’t aware of the financial problems. However, the board also didn’t pressure the outgoing ED to provide clear explanations of discrepancies in the information provided when he worked there. So a few small signs were there but weren’t pursued.
And this nonprofit also faces the reality of having to shut down.
What is to be done?
After a bit of digging, a common theme becomes apparent rather quickly. The Board of Directors in each case did not take action in several ways that may have prevented their issues from becoming overwhelming. There are several times when each board could have acted differently and their situation may have been averted. At least, had the directors been aware of the options available to them, the outcome may have been different.
It is pretty clear that, ultimately, the board of directors in all three instances were responsible for their situations. Can you identify where the problems may stem from?
Current nonprofit operations are pretty complex. Consequently, some volunteer board members may not know the complete scope of what their roles and responsibilities actually are. It is also difficult to sit at the board table and be frank about your concerns if you aren’t completely comfortable about your own understanding of the topics being discussed.
In these three cases, the board’s will be concentrating on dealing with the issues at hand. However, when the panic is over, and things get back to “normal,” someone at the table should be asking for board training. They should also look at governance improvements. And the boards should be looking at changes to the way they do business. Finally, each director should have a hard look at what being a director is all about.
Being a director is sometimes exciting, sometimes challenging and sometimes satisfying. Only through ongoing learning and development, will there be less board challenges faced by directors in today’s complex nonprofit organizations.
Stay tuned for further discussion on this topic. . .
