Nonprofit Hon Essays

admin   February 26, 2010   No Comments on Nonprofit Hon Essays

To deal with bad management in the commercial world, God created shareholders. In the non-profit world, however, when management stumbles, steals, or simply loses focus, who can call management to account? Must the key stakeholders in a non-profit — beneficiaries, employees and funders — persevere, Job-like, in despair of salvation from lousy management? Often, the answer is yes, unless the board of directors of the non-profit oversees the organization with a zeal that exceeds the minimum legal standard imposed on boards of directors. This means that a non-profit board not only has to measure up to the common law standard of fiduciaries, and not only has to insure compliance with IRS rules, but it must also, in the person of at least one, but ideally many, independent board members, bring passion to the job of oversight.

There are three kinds of nonprofit board members. First there are those who serve on the board for prestige, or for something to do with their evenings other than accumulating embarrassing cookies on their Internet browser night after night. Second are those who have a real interest in the organization and who bring experience, contacts, judgment and other worthwhile resources to the board deliberative process. The third group, and not all boards have any of these, are board members who sink their teeth into the operation of the organization, who simultaneously understudy and oversee the activities of the executive director. The third category of board members keeps the other members of the board from being ‘Grassoed’ by sophisticated, overly self-serving executive directors, and from being dragged into a financial or legal tangle by incompetent ones. All boards of directors should strive to have, or to anoint, at least one board member who will qualify for the third category. If no one on the board is a natural, the role should be assigned and rotated among board members.

Management consultants like the idea of resilience in an organization. It means, in part, that there is ‘give’ in an organization’s moving parts, so that failure at one juncture doesn’t necessarily cause a systemic breakdown of the whole. The mother of all resilience is found in the Internet, which has so much redundancy, so many alternate paths for information, that it is perhaps even a theoretical impossibility to shut it down.

Non-profit board members pass up easy opportunities for achieving, on behalf of the non-profit, some of that same desirable resilience. Many non-profit board members unconsciously segregate their non-profit life from their ‘real’ life as a businessperson, professor, social butterfly…whatever. If instead they self-consciously took an aggressive approach to incorporating their non-profit colleagues, primarily other board members, into their routines of networking and casual, after-hours social interaction, the non-profit on whose board they served would benefit.

An example: the executive director of the organization seems to be doing an adequate, but not inspired job. A board member has private reservations about this person, but is never in a setting at which he or she can signal the feeling of unease to other board members. Other board members have the same unease, and the same reserve about voicing it. Consequently, what should be a discussion about arguably the most important role of the board – to oversee management – never happens. Had board members made an effort to interact outside of board meetings, for coffee before a meeting or in an unrelated social setting, the matter would have come up and the board would have been drawn into a more determined look at the executive director’s performance. That in turn may have lead to either or both of a more useful evaluation of the executive director or changes in personnel.

PACT, People Acting for Community Together, coordinates local activism by community groups – mostly religious organizations — in Miami-Dade County. The organization pursues causes that (i) unite the constituent groups (an important concern, given the participation of churches of all denominations, synagogues and mosques); (ii) are popular among members; (iii) are winnable; and (iv) are of a nature to attract media attention. The group has successfully lobbied the local transit authority to vastly increase the number of transit buses in regular service and lobbied the local school board to institute the direct instruction reading curriculum in schools serving low achieving children.

Here’s an astounding piece of data: this year, more than ten percent of the graduating class at each of Harvard, Yale and Princeton applied for positions with Teach for America, a program that places recent college graduates in teaching position in public schools (mostly urban) around the country. While the commitment is only two years, and the vast majority of participants move on to more remunerative career tracks after their two year stints, the fact that so many high achieving young people are attracted to teaching is telling.

We’ve been hearing about teacher shortages and a decline in the quality of new teachers entering the filed for many years. So why is teaching in an urban school up there with investment banking as the in thing these days for Ivy League grads?

Dunno. Part of it is packaging (nothing wrong with packaging: think Apple Computers; think Frank Lloyd Wright; think Parris Hilton). Part of it is idealism, an irrepressible supply of which lies waiting to be mined as each new cohort of youth emerge into adulthood. And part of it, no doubt, is herd mentality. Whatever it is, the result is that a huge amount of precious social and intellectual capital is flowing into urban school districts, and that’s a very good thing.

The mission of Partnership for Public Service roughly parallels that of Teach for America. It aims to encourage young people to consider job opportunities in the government sector. And it does so by framing the opportunity in idealistic terms, by educating college graduates about career opportunities in government and by connecting students with agencies looking to hire.
How about doing the same at the state and local level in Maryland? Perhaps the good folks at Partnership for Public Service would share some insights into how to implement their strategy at the state and local level.

Wherever your taste lies in the way of size of government, it’s fair to say that better government, meaning, in part, more competent government employees, is preferable to less good government. Also, as all those public sector ticket punchers move on to careers in the private sector, the effort might lead to a more informed public discourse on the evolving role of government — the promise it makes and its limitations in keeping those promises.

Jim Withers loads up his backpack with medical implements and supplies and hits the mean – err, rather, poorer streets of Pittsburgh to look for homeless in need of medical attention. Withers, a physician affiliated with the Mercy Hospital of Pittsburgh, takes what he calls a “user friendly” approach in outreach to homeless. “We went under the bridges and the abandoned buildings to get to know our patients as people,” he said in an interview with The Chronicle of Philanthropy. “If someone says he is the King of Cuba, it is important for you to listen and learn about his kingdom.” Despite the backpack full of supplies, Dr. Withers emphasizes steering the homeless into medical and other social service resources. The program, Operation Safety Net, involves volunteer medical students, some of whom have set up similar programs in other cities.

This approach is reminiscent of the “barrier free” medicine approach pioneered by Lillian Wald’s Henry Street Settlement clinic in New York City a hundred years ago. See Marion D’Lugoff, a modern day Lillian Wald, was the animating spirit behind Johns Hopkins University’s Lillian Wald Community Nursing Center in Baltimore. To the deep anguish of her family, friends, professional colleagues and patients, Ms. D’Lugoff recently succumbed to cancer. As one of her former students said, Marion had the mind of a scientist, the heart of the saint and the mouth of a sailor (actually, that’s not exactly what she said, but close, and closer to what I know about her). Contributions to the Lillian Wald Center can be made in Marion’s name through

The issue of agency has fascinated minds with nothing better to do for ages. Specifically, when does the relationship of two parties rise to the level that allows third parties to treat the actions of one as the actions of the other? In a recent case involving a proctor hired by a testing company to oversee a test, the issue was even more rarified, posing the problem of when not only the actions but the state of mind of the alleged agent can be imputed to the principal. In Hildebrant v. Educational Testing Service, 2006 WL 2772606 (MD), the Maryland Court of Special Appeals ruled that a test proctor’s bad faith allegations of wrongdoing against a test taker could be attributed to Educational Testing Service. The plain vanilla rule on civil (that is, as opposed to criminal) wrongdoing is that the victim of the wrongdoing is entitled to be made whole, with money, for the wrong, whether the wrong involve a bent fender or an incompetently treated illness. But that’s all the plaintiff gets. The policy intention under this plain vanilla rule is to make the wronged party whole, and not to punish, to spank the wrongdoer. Only where the wrongdoer’s actions are motivated by spite, by a specific desire to put a hurt on the victim, does the law turn to spanking. Spanking, in legal terms, means some enhanced level of judicial jeopardy, such as a broader measure of damages, or imposition of legal fees, or even hostile questions from Mark Steiner. While that’s not exactly why ETS argued the no agency angle, a loser issue under normal circumstances, it’s a good reason to fight the issue generally. Had ETS been able to show the court that it had trained its proctors carefully and explicitly on the issue of hostility to individual test takers, it might have been able to argue that even if the proctor in question was its agent, she had acted outside her scope of authority. In truth, this case is more complicated than that. Moreover, the Maryland intermediate appellate court was in its ‘not ready for prime time’ mode, as happens to the best of us on occasion, and it got this case wrong anyhow. The lesson for all of us ‘there but for the grace of God go I’ bystanders? Any nonprofit that regularly uses volunteers should review its training or orientation materials for direction on the issue of good faith and the importance of avoiding actions based on personal animus or any other concern not directly germane to the mission of the sponsoring agency.

Who da thunk a nonprofit real estate developer, which is thinly capitalized, has no means of raising private capital outside individual deals, handles huge sums of other people’s money and operates on microscopic margins, could default on its bonds? In Medill v. Westport Insurance Corp, 2006 WL 2820896 (Cal), a nonprofit developer defaulted, and the bondholders sued the nonprofit and its directors and officers. The defendants in the suit tried to get the organization’s insurance carrier to cover the claim under its directors and officers liability policy, to no avail, since the policy did not cover breaches of contract. “Wha’ happened?” cried the defendants with dismay. The organization’s board and management had failed to insist that its insurance agent match up coverage with potential exposure to claims. Primitive tribes are known to go into battle with the belief, based on the warriors engaging in some preparatory ritual or wearing some magic clothing or amulet, that enemy bullets or arrows can’t harm them. In our more sophisticated times, organizations engage in business with the same faith based belief that the piece of paper labeled certificate of insurance has the same magical quality. In fact, it does – or can, but only if someone asks the right questions or gives the insurance agent sufficiently informed direction. D&O insurance is hugely important. Don’t serve on a board without coverage and, if you are in management, don’t allow your board to blunder on without it.

Charities should only attempt to operate a business if the operation of the business, that is, as opposed to the revenue opportunity, furthers the organization’s charitable mission. The more obvious, but lesser reason for that caution is that income which is unrelated to the charitable mission is subject to income tax. The more important reason is that running a business is tough, and will absorb a lot of executive time. High skill executive time is as precious as money. Neither resource should be spent on a business venture without measuring the opportunity cost of doing so to the charity’s mission. To complicate the picture further — and we should all be so fortunate — if the business venture is too successful, the IRS may decide that the charity is pursuing a substantial noncharitable purpose and therefore yank its tax exemption. (Not to worry. Few such businesses are likely to be that successful. Those that are can hire a lawyer to gin up an exempt purpose rationale for the business activity. Problem solved)

Charity TV: Queen for a Day goes Tivo. Charities are producing video and TV quality shows that highlight their charitable activities. Extreme Makeover: Home Edition involves builders and architects who repair the house of someone struggling economically. Nascar Angels focuses on organizations and individuals involved in charitable activities rather than the recipients of charity.

In the nineteenth century, according to a recent article in the Chronicle of Philanthropy, you could buy tickets to poor houses and watch poor people eat sumptuous dinners that you helped pay for.1 We chuckle at the class-conscious voyeurism of the well-to-do spectators and grimace at the humiliation to which we suppose it subjected the poorhouse residents. In doing so, however, we miss the essential similarity of that practice to the “up close and uncomfortable” practices of our own day. Consider, for example, one day a year visits to the homeless shelter to serve up Thanksgiving dinners. The class-conscious voyeurism and self-congratulation that manifestly survives to this day, however, is less important than the reminder that others remain in need.

1The Chronicle of Philanthropy, page 24. February 8, 2007.

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