Episode 224: Defining Strategy for a Board - The Key to Ownership and Meeting Community Need
Welcome to another edition of Around with Randall, your weekly podcast for making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.
Another great day right here on this edition of around with Randall, an episode of two ago. We talked about ownership, which was an odd conversation for non profits, and the question that was posed by the title of the podcast episode, as well as the content was who owns the non profit? And I posited that we need to have borders on the non profit because they're the owner representative of the greater community.
Got a question about that. Well then how do you actually do that from a strategic perspective. How do you align that. And I have clients that I work with that were doing this. I thought the question was so good that really what we need to talk about is how do we define strategy? I think from a simplistic viewpoint, we tend to make it a lot easier than it actually is.
Well, it's, you know, where the organization is going to go. What we're going to do. And at a very tacit level, that's true. I won't argue with that. But is that really what we're talking about? Is that really what we want in board ownership, in being strategic? And I would argue that that's not deep enough. Today's episode is all about how do we develop strategic mindset in a board.
How do we develop the processes and the support that goes along with being strategic and in doing so, elevate that sense of ownership? An unintended part two of who owns the nonprofit? Well, let's start with the big picture. What is strategy? A strategy isn't a document. It's not a retreat. Strategy is an ongoing commitment for thinking ahead. And we're going to come back to this thinking ahead thing constantly through our 20 minutes together in this 21st century classroom.
In thinking ahead, it's about making the really hard decisions and aligning organizational efforts with long term strategy, mission driven impact. That's easy to define or maybe easier to define. But part of this is getting into the how to do that. So let's start with the philosophical. And then we'll delve deep down into the tactical. Why is this so important to have strategic be clearly defined.
Well let me start with just a base thought process. If everybody on the board doesn't actually agree with what the definition of strategic is, how do you move forward? Have you ever sat down with your board? Maybe you're the CEO, maybe you're not the CEO, but you're a viable part of the executive management team, and you can challenge your CEO with this.
Your board chair and say, do we all agree as to what strategy actually is? I'm working with a client to go through this process. And what I found out was, which is kind of led to these two podcasts, is that not everybody's defining strategy in the same way? What I was making of a large assumption, we know what assumptions do, particularly in Randall's world.
What I pivoted to based upon also really smart board chair was we have to start from the beginning. How do does a group define something similarly? So we all start from the same point and it may seem trivial. It might seem benign, but the further we got into the conversation, the more we realized how important it was that we need a starting point where everybody is in the same dot, the same place.
How is strategy defined? And while I'm the consultant, most of the time, this is one of those circumstances where I want a guide, but I don't want to define because it can't be my definition. I'm not on the board. I'm guiding them to toward it. But we have to come to that first conclusion. How do we define it?
By the end, I think we'll get there. The second thing to think about is when we define strategy, things come out of it. Redefining the role and purpose of the board. How often do we hear about, read about or maybe we are a board member on another nonprofit, or the one you maybe you listen to a podcast as a nonprofit board leader, and board meetings and board roles are not clarified.
What is it we want you to do? What is it that you should do? How do we measure that? All too often. Sometimes that's a challenge. I have another client that they're beginning, a nonprofit board. They they've had volunteer support and success, but really what they're doing is they're adding a form and a formal nature to it. And this is the first question, what's the job description?
Well, you can't have that until you have strategy. What are we trying to accomplish? The second thing is, is that when we do this correctly, it then begins to create priorities for the board, for a governance board that is driven by the common conception of what the organization should be doing for a foundation board, probably more driven towards philanthropy doesn't mean they don't overlap, and there shouldn't be dual responsibilities, really more responsibilities for philanthropy on the governance board.
But the point is, is they're not isolated. The third thing is, is when we have common strategy, we actually redefine the board meeting experience. Does anybody want to go to bad lunch meetings for board during a board, conversation where it's the same thing every other month, where we review the finances for a while and then we, you know, we have a mission moment.
At some point we eat lunch, and the CEO talks for a long time. And we talked about this last time. They can't work long term because it becomes dependent on the staff. And if the staff changes leaves the board doesn't have ownership. Then. Number four is that if we do this correctly, it provides what I would think of as strategic information and a sense of accountability for that information.
This is an interesting conversation because nonprofits come in different sizes and complexities. If you're on the board of a hospital system and let's go one step further, maybe there's a heavy emphasis in mental and behavioral health, chemical health issues. Most board members don't have a clinical expertise in that area. There may be 1 or 2, but if you haven't been to medical school, if you are not a practicing physician with an expertise in chemical, mental or, or, behavioral health.
How are you supposed to know what to do if it isn't about strategy? Because you can't really know. And this is an interesting conundrum which gets into the complexity of organizations. The more complex they are, the less you're going to talk about the operations. We talked about that last time, about elevating conversation. Well, if your health care organization is one in which is highly complicated, you're more dependent on information flow from the CEO, the CMO, the CMO, education.
Running a university is complicated to some universities. Multibillion dollar organization. We're not all faculty members. We're not all researchers. This is all to say is that strategy gets us all to the same playing field, or the same playing level, where we can worry about the organizational long term. The fifth thing is, is that great strategy strengthens engagement and culture.
People know what to expect when they go into a committee meeting, a board meeting, they know what to expect in terms of their responsibilities. But more importantly than expecting it, everybody accepts it.
All of this strategy conversation is critical, but as we kind of morph into the tactical, how do you do it? It frames for us what we want on our boards. So the first thing that you could do from a tactical perspective is define for the everyone is on the same page. Everyone can agree what strategy is. Let me give you an example of why this is important, because the questions you ask of yourself or the board actually can be incredibly different, even though they sound the same.
Think about a board making a decision about. Moving the organization forward. Are these two questions the same? Should we build a new building for that particular purpose? Some would argue that strategic. What happens if I put it this way? What's our 3 to 5 year campus master plan for all the accomplishments or buildings or programs that we want based on the things that we have, the resources we're connected to, have access to, and maybe what the rest of the community is doing in this area.
It actually turns out the second question is a much higher level strategy. You would define that as. And this is what I was referring to a minute ago about thinking ahead. Where is the organization going to be in 3 to 5 years? Or where do we want the organization to be in 3 to 5 years, and how do we do that?
Well, that could include a building on the campus. I'm not opposed to that. But if you decide the building on the campus and then two years later realize, well, there was a bigger purpose, and now we've got a building that we is right where we don't really want it. You failed the strategy. And so the first premise of strategy or figuring it out and defining it is, is that we're really talking about minimum three, maximum ten, maybe 15 years of planning now planning out six years to ten years or 15 years maybe in pencil.
Things change. All too often, though, we're worried about where we're going to put the building. It's going to be in the building. How do we finance the building? All reasonable questions. That comes after you figure out what you're doing for a long term plan. Let me give you an example. I was really proud of the time when I was on the Ronald McDonald House board here in Omaha, where we talked about the concerns we had and the initial question was, well, should we, you know, add on to the house.
And there were some of us were saying, we're not asking the right question. We don't have the right common definition of strategy. The question we should be asking is what services do we need to provide? How many people is that going to entail? What's the waiting list for people getting in the house? How many partners do we have in the community and what are their needs going into the future?
And then right behind that, how do we finance all of that? What that led to was a totally different series of discussions about what we want to build, which doubled the size of the house, putting clinical space inside the house so little kids don't have to go out into the cold in Nebraska, because that was better for them.
Building out office space for partnership organizations to do things with the families that we just didn't do. They were better suited to one I was most proud of was that from a financial perspective, to create a financial stability over the long term. For 15 years, we entered into the new market credit area, where literally we were building up dollars in new market credits, getting tax breaks, so that in seven years, which has come to be, there would be a cash fund that would come in to create an it kind of a pseudo endowment.
Strategy became the defining word for us about where do we want to be in ten years. We want to be more financially solvent, serving our guests, as they're called families, more vibrantly, with more space that met the length of stay, which is actually longer. We're here in Omaha with the medical center and transplants than the average Ronald McDonald House, which was three days versus us, which was 120 days.
We need different rooms. The strategy piece was, where are we going to be in 7 to 10 years? That's the length of time we should be talking about. Part of the reason ownership did this, going back into the previous podcast, is so important in how strategy ductile or dovetails in all of this, is that when we think about it, a CEO may not be there for the whole time 7 or 10 years.
And what happens if the board doesn't own that strategy? The CEO begins changing halfway through when you're beginning to execute planning. This is why that definitional piece is up to where are we going to be five years from now? What can we anticipate would be needs in five years? How can we build out a plan to fund those things in five years?
Now, if you're a foundation board, let's say in a health care system or hospital, you don't get to choose what the clinical needs are. The CEO or the governance board or someone clinically is going to make that decision. The foundation board has to follow along. That doesn't mitigate how important strategy actually is. Strategy. Once you figure out kind of where you want to go, number two in the tactical defines what you're looking for in a board.
If you're thinking 5 to 10 years down the road and we think about and use the example, the Ronald McDonald House is kind of a common place for us. Based on my description, are the board members we needed to do that were much different than what we're just going to double the size of the house. Who are the partner people, partner board members that we need in the different clinical enterprises in town?
All we did was worry about the size of the rooms. What do we care? Who are the partnership organizations who can offer services that we can't? Who are the finance people in new market credits? And I got an MBA in finance, but it's not my area of expertise. How do we find someone who could help shepherd the board through this as a content expert, which we went out, looked for.
So this led to who do we look for in our board? Number three, it also looked to me what our responsibilities were on the board. It wasn't common to show up and it was much more then you have to make introductions. Where do those things? But we could sit down and say, here's our strategy. The new market credit is a good example.
SAT down with a couple of people. I was chair of the governance committee. So I was in all of these meetings. We were saying, this is where we get all can you help us with this? Yes. Here's the job description. Yes. You're the obligations. Yes, we're very clear about them. But in your case, your service in the finance committee and as the expert on new market credits is going to help us make sure we don't make a mistake.
Can you do that? If you don't have strategy, you don't know to go look for that.
The other thing that comes of this is what are your committee structures? Because we rewrote our bylaws based on this process, the House, we realized we didn't need an executive committee. The board wasn't that big. What we needed was a governance committee to drive strategy. And we needed a partnership committee because we needed to be better partnered in the wheel.
All of a sudden, we started looking at our committee structure. We didn't need a major gifts committee. We had a philanthropy committee, but they were worried about long term strategies with philanthropy. How do we supplant giving into things? How do we then partner that into finance to be able to afford things? When somebody says, I'll give you $50,000, but I'd rather give you $5 million when I passed.
But you can't build a building on that. All of these things pull together.
It also informs what your board meetings look like, feel like when you put strategy at the top, when you can define it. Let's use finance as an example. I talk a lot about parting with gift officers, the idea of leading and lagging indicators, and to all too often we're worried about lagging indicators and influence are pretty basic fundraising.
It's how much money we raised. The problem is, is that you get that number and it's already over leading indicators and economic theory of how we can kind of try to reject, predict what might be coming is all based on data that is forward thinking in philanthropy or fundraising. It's how many calls and how many visits and how many how often are we out?
If done correctly, that's an indicator that probably good things will happen in finance. It's not looking every meeting at last month's finances, the best board I really influenced wasn't actually the Ronald McDonald House, but it was another organization where it took me 15 seconds to figure out that no one on the board could read a balance sheet or an income statement.
They were all pastoral based on the mission, and one of the things I'm pretty proud of, and this is many years ago, was we brought in an accountant and we said our board meeting, we're actually going to teach everyone how to read a balance statement, income statement, because I'm tired of sitting listening to the CFO talk about this, because this has nothing to a strategy.
It's a lagging indicator. It's money that came in or we spent. It's already gone. I want to look forward, which meant they needed to be able to read those sheets so we could talk about the financial issues down the road. Those kind of thoughts about how you look forward are dependent upon your board's ability to do things by consent agendas and in committees and they have a base understanding.
I'm not saying get rid of people that can't read a balance sheet or income statement, but what I am saying is you need people that can actually do that, and you may have to train them. Strategy then gets us into setting priorities. It gets us into, you know, as we just talked about, the agenda setting and our decision making.
It talks about information flow. The more complex organization may need more just reporting, like a health care organization just finances versus a smaller organization. Maybe there's a little bit more input because there's not as many people on staff. It also, as we talked about, leads to the eventual high point to me about strategic collaboration. The board with itself, the board with its executive leadership, and then eventually the board with the community.
Strategy is important. Let's go back to our definition. Strategy is not a document or retreat. Strategy is an ongoing commitment to be thinking ahead three, five, ten years, looking at things and making hard choices that are aligning with the mission, organizational effort that have impact. When you do your next board retreat, when you do your next annual meeting, focus on defining strategy.
And in doing so, what you'll set is a common guideline that will help your organization allow the board to own the nonprofit. Incentivize the executive team to do great things. Create a path for the organization to be more impactful in the community, all based on one word strategy. Finding that common. Agreeing to that common value, based on some of the things we've talked about today, will set you free in terms of growth, impact, scalability, whatever it is that you need to do to be more effective, because our communities need this strategy that will take us there.
Don't forget to check out the blogs at how it plans to be two per week. 92nd reads are things that you can kind of think about, read sometimes about what I do in terms of coaching, sometimes about philanthropy. If you'd like to reach out to me. Podcast. Helpfulness Wycombe. I find myself saying it more and more often that the nonprofit, philanthropic world is the whole between.
Government, free enterprise. Business for profit. We need this more and more. The challenges we're going to face as a country are going to require nonprofits to step up, to do more, to be more strategic, to meet the needs of the community. What you do as a volunteer or CEO or gift officer, health care, social service, education, it doesn't make any difference.
You're serving a noble purpose. Lean in a little bit. Take a chance. Push the envelope. What you'll find is, is that your nonprofit can be better. You can be better. The people you're around can be better. Which leads me to my all time favorite saying some people make things happen. Some people watch things happen. Then there are those who wondered what happened.
We are people in the nonprofit world who make things happen. For those people and entities and organizations who are wondering what happened. And I don't know a better way to spend a career. I hope you feel the same. I hope you can build that strategy to be able to execute on making things happen. I'll look forward to seeing in the next time right back here on the next edition of Around with Randall.
Don't forget. Make it a great day.