Episode 59: The "Big 3" of Boards

Welcome to another edition of “Around with Randall” your weekly podcast making your nonprofit more effective for your community, and here is your host, the CEO and Founder of Hallett Philanthropy, Randall Hallett.

It's a pleasure to welcome you again here to “Around with Randall”. Today's subject matter is about board engagement, and really about how to best partner with your board. And if you're a board member, how can you take some things that maybe we talk about today and to apply them in your board. I’m learning more and more after almost a decade of consulting, in 20 years before that in practice, that we take for granted that boards actually know what they should be doing. What best practice tells them, and as a result, there's not the kind of orientation or process that should be a part of what I would consider a growth opportunity for both staff and for the volunteers who serve on boards. So today we're going to talk about kind of the big three. What are the three major concerns boards should have, and break down each one a little bit. So the theoretical is the big three, and the tactical are the elements within each one to be able to take back and have conversations and to improve what I view is the big three. 

What are the three enormous areas of responsibility for a board? Number one is understanding fundraising. That if you're a nonprofit in some way shape or form, fundraising is an important piece of what you do, and we'll talk more about the details the differences between organizations that depend on fundraising for 100% of the revenue and in places where normally there may have been very little fundraising, there were other revenue streams, but fundraising is now being pushed into conversation. 

The second major area is the idea of governance. What is it that we're trying to accomplish in the day-to-day existence? What are the requirements?

And the third is dreaming big, that vision. We'll talk about why that's important with an example of some place that didn't and it ended up costing them because the leadership, the board, was unable to foresee the vision that was necessary to keep the organization moving forward. 

So fundraising, governance, and finally dreaming, and dreaming is probably the most important so I’ll save it to last. So let's talk about fundraising. And we've we've obviously, on this podcast and in various other ways, I’ve talked about fundraising in a multitude of ways. There are kind of what I call three organizational models when it comes to funding or revenue. One is is that 100% of the revenue comes from philanthropic endeavors. Those are usually smaller nonprofits and frankly their boards are more engaged than the larger non-profits when it comes to some of the issues and challenges that come from this. But then there are those that have not traditionally had as much fundraising or no fundraising as a part of their nonprofit business model. Let's talk about that for a second. One area is education, and it's not that there's been no fundraising, but we've talked about this before. Particularly in higher ed, that more and more dollars are necessary to make the budget, in particular growth and investment, occur, and that comes from philanthropic dollars. Thirteen point five percent of all revenue that comes in to higher ed comes from fundraising. Nowadays, at least, the last numbers I saw well twenty years ago that number was like two percent and this is why you see that shift in leadership in the CEO, chancellor, president-level of a higher educational unit, public education, private schools, figured this out years ago. There's more and more demand, and I’ve talked about it many times. When I started in this industry a long time ago, the university of which I had an internship with had like two or three fundraisers, and now universities have you know not only departments, there's fundraisers everywhere. Let me give you another one. 

Healthcare. Healthcare, for many years, was fundraising was not restricted but seen most often in things like children's hospitals, charity hospitals like you think about St. Jude’s, and the amazing work that Danny Thomas and Marlo Thomas have done to create an environment that's based totally on philanthropy. But most healthcare organizations 20 years ago weren't as concerned about fundraising because they had a revenue stream. The revenue stream was reimbursements. Well, that's changing. The cost curves. It's more expensive to provide health care. Our reimbursements haven't increased as much. All of a sudden we're seeing dramatic increases in funding, much like universities 15 years ago, into healthcare, and the investments that are required to grow healthcare opportunities and service to the community are sometimes coming from philanthropy. 

But let's go all the way to the extreme. How about organizations that traditionally have never worried about fundraising, and this is something that's near and dear to my heart. Based on the research I’ve done over my career, educational career, it used to be the public education, and I’m talking about k-12 primary, secondary education, was never a real concern when it came to fundraising. The state or tax dollars or some amalgamation of the two provided the resources necessary in the schools. In today's world that's changing. Consider what's going on in school districts where they have created endowments for scholarships or they have capital campaigns which are very prevalent in today's world. In some ways they're providing resources where bonding may have not gone through or they've reached limits on what they can bond from a school board perspective back into the community for tax dollars, usually tied to real estate. One high school recently received a $25 million gift. That's Abington High School, in their district, to build out stem programming. I know of several places that have had $10 to $15 million campaigns to build co-curricular facilities with the partnership with the school district saying the bond dollars, the tax dollars, will stay in the classroom but if we want better co-curricular facilities philanthropy has to be a part of the equation. There are now more than 40 percent of the elementary schools and the secondary ed - so junior high high school, middle school, high school - PTAs that are generating more than $20,000 a year for ancillary things that are going on for field trips, and for supplies, and for experiences for the kids. Fundraising has become a conversation nationally in secondary ed, and ten years ago it wasn't even discussed. 

Your board has a responsibility to understand where they fit into that and that means an accountability in reporting out what are the metrics we're looking at, what are our goals, do we align job descriptions with them. And then that part that's so important in terms of introduction. One of the things that gift officers talk about is they don't have enough great prospects, referrals. What's been true for decades when we look at the data is that the most likely larger donor, major donor, comes into our universe no matter if you're in healthcare, education, social service, whatever, through a referral from a board member than any other part of the organization, more so than maybe a c-suite, or executive leadership, or a grateful patient program, or an alumni base. The most likely major donor comes in through a referral process through the volunteer board. So part of this is also being able to understand the importance of the connectivity that comes from this, and I’m going to pause there for a second because this is going to relate back into governance here in a moment, which we're going to tackle. So understanding the basics of fundraising, what the numbers say, what our goals are, how are they reporting out, do you have a dashboard that's easily understood are critically important for that first element in helping and educating board members that this is what the bigger picture is. 

I have a client who we're doing this with. They're rebuilding their board and I had a great call with the chair of the board and we went through these three different things, but the thing that was surprising to her was all this information about fundraising. She's a lawyer. She's not in fundraising or philanthropy. Other than her service she believes in the mission of the organization, but she was startled by how much data there is to back all of this up. And I said we're a sophisticated animal here and it's our job to educate our boards as to what we're doing and why, it's important and how they're a part of it, so fundraising is that big first element that's a key to a board. 

The second is governance, and I’ll tie in fundraising here in just a second, but I think there's something to start with. Number one is how you structure your board meetings, which leads to governance. And my son who's learning to, you know, spell - second grade - is learning that words sound the same but have different spellings and different meanings. And I’m going to use an example. Do you have a board meeting, or do you have a bored meeting - b-o-r-e-d b-o-a-r-d, and the problem is too many places are having bored board meetings. The agenda that you choose to drive is really important. If all you're doing is reviewing finances and reporting out all the information coming from the internal source and it's just being pushed out in the board meeting that is a b-o-r-e-d meeting. It's boring. Drives me crazy. All of those things, for the most part, except for maybe a mission moment, can be done through a consent agenda. That information can be sent ahead. I don't need time in the board meeting to actually read the balance sheet, the income statement, the cash flow. The reports from the Executive Director, President, CEO, you can send that stuff ahead of time. I can read it while my kids are getting ready, you know, for bed before I go put them down, at home. But the time together can't be replicated in other places. I want that time as a leader to interact. What is the vision we're trying to get to? What are the great concerns that are going to drive us to that opportunity? How are we going to get there in manageable bite-sized pieces? What are the tools that we need to do? So what are the foreseeable threats that we're going to have to deal with? I just did a strategic retreat for a board and had these conversations and asked them to bring their last four or five agendas to their board meeting and they were report outs, and I asked the question, do you like these formats, do you feel as if you're valued, as if you're making a contribution, and the uniform answer was no. Controlling your agenda so that it's just not a report out but an interactive conversation about what's possible will change the level of engagement your board has. Whether that's in one group, or small groups, lots of different alternatives. So the first is the agenda. 

The second is the difference in job description, and yes you should have a written job description. I define it and break it apart as primary and secondary responsibilities. Secondary responsibilities for all of our existence has been, for the most part, the standard. Come to the meeting, read the minutes, hire the Executive Director, approve the 990, review the budget, review the the minutes, oversight of the basic organization, the fiduciary responsibilities. I’m not here to say you shouldn't do those things. They are legal responsibilities and they're critical, but they are secondary responsibilities. They can be done in short order with the same level of effectiveness than if it takes the whole time that b-o-r-e-d meeting. Primary responsibilities are about outreach, and this overlays into philanthropy. The fundraising piece is the idea of, are they obviously making a gift. Number two, are they connecting you to people? Do you have metrics for board members that they need to introduce two, four, six people to the staff on an annual basis and it's tracked who that is? My gosh, could they carry their own small portfolio in partnership with a major gift officer. Are they personally, individually introducing you to people? And this is where I get into the conversation about how that happens. 

A handoff is not just, call bob. That's not helpful to us. We have to teach our board members about how that occurs. A cup of coffee, golf, lunch, dinner, and why that's important because we want to pass that trust that they've developed in this business, or personal colleague, into what the organization is doing. And that individual, the gift officer, ex director, whoever the internal staff member is, want to pass that trust off to them. That can really only be done if it's done face-to-face or some effective way. It's also important for board members to realize we're not asking them to ask everyone for money. In fact my experience tells me they're no good at it without a lot of training. What we want them to do is, what I think about is RETE, r-e-t-e, can they recognize the opportunities, know who to introduce the staff to; can they engage with that person in a meaningful way to advocate and talk about why the organization is so important; can they transition it, that hand-off into someone who can move the relationship forward; and finally, can they explain why this is so important to the community. Recognize, engage, transition, explain. REET -  r-e-t-e - we don't need them to ask everybody for money but we need the introductions and that also brings us to what I consider a primary responsibility. 

How do you look at your board formation? I use a chart that's a social media social mapping to figure out where are the groupings of people in a community; churches, community or country clubs, yacht clubs, wine clubs. Where do people socially gather and then how do we get representation inside that group with people who are connected? That's what board membership should look like. That's what we should aim for in putting people into our board, picking them. It's not, well we need four board members who knows somebody. It's strategic. It takes six-to-nine months to say where are the people we want to engage as an organization, and how do we find people within that social grouping? Again, that country club, that wine club, that yacht club, that the church geographically in the city, whatever, to be able to have representation, to introduce us into those circles to explain what our mission means and why it's important. 

So the second is governance. It's important the secondary responsibilities - all the legal, fiduciary responsibilities that come from it - but they can be done in committee work. And also in the framework of a consent agenda and doing some homework at home to allow board meetings to be interactive to drive home the importance of those introductions. That outreach, those primary responsibilities so we don't have bored b-o-r-e-d meetings, we actually have great interactive conversations about what's possible. number two is governance. Number three is this idea of dreaming big, and it's probably the shortest conversation but the most important. My example for this is actually Kodak. And I use this with boards all the time. Kodak is a Rochester, New York-founded film company and for a hundred plus years was the light of the world when it came to photography and particularly film, but along the way they their board lost vision and things began to be developed in Kodak that were never taken advantage of. Let me give a couple of examples. In 1975 the first digital camera was created, discovered, by Kodak, by engineers and and unbelievably future-thinking people. And what was realized was this could be the future, but Kodak never patented the technology. Now every cell phone in the world has this. Why? Because they were a film company not a photography - you know digital camera - missed opportunity because they weren't thinking big. In 1957 while doing some discovery around paper and liquids and and trying to figure out how to build out the insta picture camera, the Polaroid engineers and scientists found this substance, created this substance that was incredibly sticky, took it to their leaders and they didn't do anything with it….super glue. One more in case-based. Early on in the 20th century as film was being developed in the first cameras - instant cameras for photography - there was this idea of replicating imagery. And around Kodak, in Kodak or partners with Kodak, there was this thought process of creating replicas of images that existed - mimeograph - which led to photocopy. Xerox. those are three examples where if boards and leaders don't think big what ends up happening is your organization gets stale. Kodak is not dead but it isn't what it used to be. The same applies to nonprofit work. The board is the consistent. The board members are the consistent community representation of what's needed in our community for that mission. 

There was a study out of Texas A&M here this last year that indicated that many board members feel as if they're there to support the CEO, and I wrote about this in a blog and said what are you crazy. No the board owns the organization on behalf of the community not the other way around. It's not the CEO who's in charge it's the board. Now, the CEO executes but the board is the constant, the board is the representation. And if they aren't dreaming about what's next, if they aren't having hard conversations about how they can be more effective no matter where you are in the nonprofit world then there is missed opportunity to serve your community. Don't be Kodak. Take things that you don't think you're connected and try to connect them to increase outreach, increase connectivity, increase service to those who need it that are within your mission.

Three major things boards should be understanding - fundraising, governance in its proper form, and structure with its proper timing, and dreaming and if you can get your board. If you're a board member, if you can do that, your organization, get your board do that, you will live forever and you will have the resources to do so because you will capture your community's imagination as to what's possible.

Again on the website, check out the blogs posted. If you want to contact me that's podcast@hallettphilanthropy.com. If you have a complaint or concern reeks, r-e-e-k-s at hallettphilanthropy.com. Always love to hear from people who ask for podcast subjects or have something to be concerned about, and I always appreciate the feedback. Don't forget, you're part of something big, something important, something that's going to change your community and I hope that you feel as if today you've had that chance to not only do it but to feel it it is phenomenal to have the opportunity to help people. And don't forget my all-time favorite saying, some people make things happen, some people watch things happen, then there are those who wondered what happened, and in life we fall into one of those three categories. Philanthropy and non-profit work is about people making things happen for people and needs that are just wondering what happened, and I can't imagine a better way to spend a career. And I hope you feel like you're making your contribution today. I appreciate your time. I look forward to seeing you back here on the next edition of “Around with Randall”. Make it a great day.