QUESTION 14: How Prepared Are We to Work With Activists?

The $500,000 Restricted Gift, the Hospital, and the Jury

Ram Charan’s final chapter in Owning Up addresses the challenging issues faced by for-profit public companies. You’ll be tempted to skip this chapter (since nonprofit ministries do not have shareholders). 

But—your ministry does have stakeholders—so don’t miss the wisdom on how to communicate with any “activist” or social media eruption.

Charan writes, “Bloggers search through the footnotes of SEC filings. Seventy-eight-year-old women with no corporate leadership experience file shareholder proxies and end up interviewed on business channels.” 

Warning, he says: “Your performance as a board will increasingly be scrutinized, as much as the [organization’s] performance.”

QUESTION 14 of 14: How Prepared Are We to Work With Activist Shareholders and Their Proxies? Owning Up: The 14 Questions Every Board Member Needs to Ask, by Ram Charan (Order from Amazon)

Finally! We’re in the last chapter of this important book. (Watch for the index and summary in my next blog.) In this blog, I’m taking liberties with the for-profit topic—to address just one of many related topics for nonprofits. Let’s call them activist or dissatisfied donors.

In his powerful book, Trust: The Firm Foundation for Kingdom Fruitfulness, Dan Busby says that “We ignore perceptions at our peril.” His short chapter on “Perceptions” includes “Ten Major Issues Can Lead to Misperceptions.” (The list: compensation, fringe benefits, intellectual properties, family members paid by the ministry, related-party transactions, and five more.)

Is your board proactively discussing these 10 major issues—or will you be unprepared when a ministry issue (fake news or not) hits the fan and/or the internet? 

Busby quotes Harvey McKinnon:

“Donor loyalty is not about the donor being loyal to you; 

it is you being loyal to the donor.”

Being proactive means your board will have policies and practices that will give confidence to givers that restricted gifts will, in fact, be restricted for the specified use. In the absence of trust, “activist” stakeholders and donors can and will sound the alarm—often inappropriately.

Ram Charan’s chapter includes several examples of activists and he lists the affected companies, by name. Some handled the issues with wisdom—and a few didn’t. He gives “four pieces of advice” for boards when “activist investors come calling.” While no Scripture is cited, you’ll find Jesus’ principles in his recommendations.

Likewise, Busby includes an “activist” true story in Trust—and he adds the Scripture (2 Cor. 8:14-25) in the chapter, “Honoring Giver Intent.” He also shares the true story of a hospital in Oklahoma that received a $500,000 gift from Troyal G. Brooks in 2005. The giver’s intent was to honor his mother by naming a new facility after her. In 2008, the hospital reneged on the agreement and planned to use the funds for another project—so Brooks sued the hospital.

Busby writes, “…the agreement with the hospital was oral; therefore, the jury had to determine who was telling the truth. In 2012, a jury awarded Troyal the $500,000 gift back plus the maximum in punitive damages—$500,000.” He adds, “Troyal is better known as Troyal G. (Garth) Brooks. Ironically, the hospital is located on Garth Brooks Way.” Yikes!

Ram Charan writes, “Every shareholder matters.” Dan Busby would add, “Every giver matters—and trust is the firm foundation for Kingdom fruitfulness.” 

BOARDROOM DISCUSSION: Dan Busby quotes Max De Pree: “When things go awry, trust powers the generators until the problem is fixed.” Here’s an agenda item for your next meeting: “How Prepared Are We to Work With Activist or Dissatisfied Donors?”

CHECK OUT THESE HELPFUL ECFA RESOURCES

• READ: Lesson 22, “Whopper Mistakes Can Unravel Your Ministry,” in More Lessons From the Nonprofit Boardroom. (Click here to read the four-page chapter.) See especially “Whopper Mistake #3: Failure to provide accountability for restricted gifts.” Click here to read Kecia Klob’s color commentary, including this from Max De Pree: “The first responsibility of a leader is to define reality.”

• READ: Lesson 31, “Where Two or Three Are Gathered on Social Media…” in More Lessons From the Nonprofit Boardroom. While this lesson is focused on conflicts of interest, it’s a timely reminder that you’re just one click away from a social media firestorm. (Click here to read the four-page chapter.) 

TOOL 6 – The Board’s Annual Financial Management Audit

20 True or False Questions! (And…how does the board know if it’s true?)

Dan Busby notes, “In the worst case scenario, clarity of ministry finances is a key to avoiding a financial shipwreck. In the best case, clarity prevents a ministry from becoming an embarrassment to Christ.”

Today’s tool features 20 statements that can be adapted for your ministry. Ask your CFO to provide the answers for the question, “How does the board know?”

TOOL #6: THE BOARD’S ANNUAL FINANCIAL MANAGEMENT AUDIT
Use this TRUE or FALSE audit annually as a first step in assessing your ministry’s financial health and integrity. 

Tool #6 in the new resource, ECFA Tools and Templates for Effective Board Governance, is just one of six assessments in Part 2 of the book that will both educate your board members and enhance your board’s competencies in financial management, legal, fundraising, and other key areas.

The big idea: trusted ministries manage resources with integrity. Boards should know and understand the three foundations of “Trusted Resource Management.”

#1. Understanding Finances: “Trusted ministries acknowledge the challenges of understanding nonprofit finances. It is certainly not a one-to-one correlation with the finances of a for-profit organization.”
#2. Achieving Appropriate Transparency
#3. Minimizing Fraud

Note: To go deeper on these foundational anchors, read TRUST: The Firm Foundation for Kingdom Fruitfulness, by Dan Busby.

Your board should expect clarity and honesty from the CEO, the CFO, staff, and the board’s finance committee. To provide clarity—so board members understand financial reports and financial trends—the information should be presented with a variety of approaches (for the diverse learning styles of your board members) and can include verbal and written reports, dashboards, and graphs.

But there is another important step—an annual checklist. This two-page checklist asks for a TRUE or FALSE response to each statement—and includes space for answering the question, “How does the board know?” Examples:

TRUE OR FALSE?
#1. Our board receives timely, relevant, and accurate financial information that is readily understood by the board. 
#6. The average size of our contributions is increasing across all gift size ranges. 
#8. Our total unrestricted revenue is increasing.
#14. Our bank accounts do not exceed FDIC limits.
#18. All significant related-party transactions are reported to the board for their review and action.

A sample completed checklist is included with Tool #6 and features color-coded “Ministry Dashboard Signals” in the “How does the board know?” section:
   • Red: Act
   • Yellow: Watch
   • Green: Celebrate

Once you begin using this annual checklist, you will add it to your board agenda every year! 

Order the tools book from Amazon by clicking on this title: ECFA Tools and Templates for Effective Board Governance: Time-Saving Solutions for Your Board, by Dan Busby and John Pearson. The book gives you full access to all 22 tools and templates—formatted as Word documents so you can customize the tools for your board’s unique uses.

BOARD DISCUSSION: Around the table, answer TRUE or FALSE to this statement: “#17. We have identified the three greatest financial risks of our ministry and the steps we should take to mitigate those risks.”

MORE RESOURCES: To go deeper on this topic, read Steve Moore’s color commentary, “Focus on Mission Impact and Sustainability. The ‘dual bottom line’ equips boards to address dead horses and sacred cows (or goats).” See Lesson 23, in Lessons From the Nonprofit Boardroom: 40 Insights for Better Board Meetings, by Dan Busby and John Pearson. 

Called to Serve: The Error of Leadership Indifference

Note: This is No. 26 in a series of blogs featuring wisdom from the 91-page gem by Max De Pree, Called to Serve: Creating and Nurturing the Effective Volunteer Board.

Max De Pree: “Trust doesn’t arrive in our possession easily or cheaply, nor does it guarantee to stay around.”

Commenting on what the board owes the CEO, De Pree packs a page with his plain-spoken color commentary on the elements of trust. New CEOs, he reminds us, don’t show up with a built-in trust factor. Ditto board members. Board members owe their CEO full trust—but board members must earn that trust by keeping promises.

I’ve endured endless committee reports over the years and occasionally—when pressed—committee chairs bend the truth to protect their reputations.
   • “Luis was late on his report.” (He wasn’t.)
   • “We’ll have that done by next Friday.” (Not going to happen.)
   • “Oh. I misunderstood.” (She understood completely.)

“Trust requires respect,” adds De Pree. “Trust multiples with truth—without adjectives and not subject to redefinition by cornered leaders.”

The author references an entire chapter on trust in his book, Leading Without Power: Finding Hope in Serving Community. It’s worth the read—especially the baseball story of the distracted second baseman who allowed a runner to steal second, resulting in two errors on one play.

“After a few minutes the official scorer, not knowing exactly how to score such a play, announced over the public address system that he had decided to write off the second error to ‘defensive indifference.’”

De Pree then asks, “How many errors in organizations are due to leadership indifference?"

Every board member should read the trust chapter in Leading Without Power. De Pree: “To tell capable people how to do their job, even innocently or with the best intentions, erodes trust. Such ‘advice’ becomes a sign of disrespect for followers. How can I trust you if you believe you are better at my job than I am?”

Whew! That hits home! None of us board members have ever implied we could do the CEO’s job better. Yikes.

Read Matthew 10 and then note this: after Jesus gave the Twelve their assignments, he didn’t pack a bag and go with them. He trusted them, on their own and in their own styles, to proclaim the Good News. Powerful! 

BOARD EXERCISE: Click here to visit the “Quotable Quotes” on trust and download and distribute the stunning list of 101 quotations on trust from Dan Busby’s book, TRUST: The Firm Foundation for Kingdom Fruitfulness. Ask each board member to read their favorite quotation—and explain why.

To order from Amazon, click on the title for: Called to Serve: Creating and Nurturing the Effective Volunteer Board, by Max De Pree (Wm. B. Eerdmans Publishing Company).

Called to Serve: The Phone-Book-Size Board Packet Syndrome

Note: This is No. 19 in a series of blogs featuring wisdom from the 91-page gem by Max De Pree, Called to Serve: Creating and Nurturing the Effective Volunteer Board.

Max De Pree: “A friend told me recently that when he gets his agenda package only a day or two before the meeting, he knows he is not being taken seriously.”

In his two-page section on “Be a Good Communicator,” De Pree touches a raw nerve—one that board members whine about frequently. He notes that effective communication between the CEO, the board chair, and all board members involves:
   • Agenda packets arriving well in advance of the meeting
   • “Producing usable minutes of the meeting in a short time.”
   • Being a "lavish" communicator.

I was reminded of the helpful Harvard Business Review article, “What Makes Great Boards Great,” by Jeffrey A. Sonnenfeld. He, too, whines about late-arriving board meeting materials:

“What kind of CEO waits until the night before the board meeting to dump on the directors a phone-book-size report, that includes buried in a thicket of subclauses and footnotes, the news that earnings are off for the second consecutive quarter? Surely not a CEO who trusts his or her board. Yet this destructive, dangerous pattern happens all the time.”

I know. I know. It’s very, very challenging to gather all the materials and documents and get them out the door to board members on a timely basis. Solution? Some boards memorialize the frequency of board reports (and arrival dates for board meeting pre-reading materials) in their board policies manual. (See Fred Laughlin’s and Bob Andringa’s excellent resource on BPMs here.)

Effective communication is fueled by trust. As Dan Busby writes in Trust: The Firm Foundation for Kingdom Fruitfulness, there are eight teamwork examples from the Old and New Testaments, noting that trust starts at the top. (Raise your hand if you’ve ever given a board devotional talk using Shadrach, Meshach, and Abednego from Daniel 3.) 

Busby also writes, “The largest penalty paid by Christ-centered ministries is the ‘low-trust’ penalty.” Have you ever connected the dots between effective board communication and God-honoring trust?

BOARD DISCUSSION: Does trust fuel our motivation for effective communication? Do we communicate lavishly? Do pre-meeting materials, reports, and minutes arrive with adequate time to reflect and discern next steps? Are board members being taken seriously?

To order from Amazon, click on the title for: Called to Serve: Creating and Nurturing the Effective Volunteer Board, by Max De Pree, (Wm. B. Eerdmans Publishing Company).

A Dynamite Idea for Your Next Board Retreat

At your next board retreat, here’s a value-added exercise to engage every board member.

STEP 1. Three to four weeks before your board retreat, give every board member a copy of ECFA President Dan Busby’s new book, Trust: The Firm Foundation for Kingdom Fruitfulness. (Read my review on Amazon.)

Busby enriches our understanding of trust in four major areas—with a simple, but powerful premise:

“Christ-centered ministries with Trusted Governance,
Trusted Resource-raising,
and Trusted Resource Management
experience elevated Kingdom outcomes.”

Who sets the tone at the top for trust in your ministry? How is your ministry perceived by donors, volunteers, the media, and the public? Busby notes, “We ignore perceptions at our peril.” In his chapter on “Perceptions,” he includes a list of ten major issues that can lead to misperceptions (compensation, fringe benefits, intellectual properties, family members paid by the ministry, related-party transactions, and five more).

STEP 2. Assign relevant chapters to each board member—and ask each person to prepare a four-minute chapter review. (The book has 21 short chapters, plus a meaty introduction.)

Trust features more than 100 memorable quotations, including:
   • “A Christ-centered ministry that lacks trust is like a teenager running through a fireworks factory with a lit blowtorch.  It isn’t whether something is going to blow up—it’s just a matter of when.” (Busby)
   • “Trust is the starting point for all healthy relationships, the fuel for team ministry, and the cornerstone of group effectiveness.” (Stephen Macchia)  

STEP 3. At the beginning or end of each hour of your retreat, spotlight one board member and his or her four-minute review. (Mandatory! Set the four-minute alarm on your iPhone—and, perhaps, award a Starbucks card for stopping before the bell.)

Imagine the engagement! After your board members have prepared their four-minute presentations—they will have already invested, perhaps, their most serious thought ever on the Kingdom linkage between “trust” and fruitfulness.

STEP 4. Following each chapter review, if you have time, allocate two to three minutes for Q&A and feedback. (Trust me. The content in Trust will energize the dialogue.)  For example, in “low-trust” organizations, Busby warns that you’ll find:
   • Internal dissension. “Without trust, the office dissension machine runs at full speed—and divides a ministry against itself.”
   • Disengagement.  Staff work in silos and “they shift from joyful service to turf protection.”
   • Turnover. “When trust is low, turnover is disproportionately high—ministries lose the people they least want to lose.”
   • Fraud. “Low trust encourages a small theft; if they don’t get caught, they may take it to the next level.”

There’s much, much more, so read the book.

STEP 5. Before you adjourn the retreat, ask for next step recommendations. (The study guide on pages 201-204 outlines possible next steps.)

If you don’t have a board retreat scheduled in the next three to six months, you can still spotlight several chapters at future board meetings. I urge you and your board to read Trust. The chapter, “Christ-Centered,” lists five ways boards exhibit a lack of harmony including, “When problem-makers outnumber problem-solvers.”

Busby adds, “Trusted governance starts with spiritual leaders who deeply know God, seek to find God’s will, and delight to obey God.”

QUESTION: Max De Pree, a former seminary board chair said, “When things go awry, trust powers the generators until the problem is fixed.” Does your board have adequate trust to fix big problems?