Venture Philanthropy Partners: VPPNews

April 2005 · volume 6 · issue 4



	Ensuring Strong Management: A Board Responsibility

	VPP Enters Bridge Investment Agreement with BGCGW Heads Up: Progress Report and Continuation

	VPP Founding Investors "Do Well and Do Good"

	Ralph Smith Joins Board of Leapfrog Business Plan Competition and Reports of Interest



		Ensuring Strong Management: A Board Responsibility All too often, the boards of nonprofit organizations do not recognize that their governance, stewardship, and strategic responsibilities insist that they ensure the organization has the strong management it needs to serve the organization’s mission. It is important to note that this phenomenon is most common in organizations that 1) have grown to a certain size (e.g., annual budgets of $1-2 million or more), 2) require new leadership skills that are different from the skill set possessed by the founding leader, 3) are transitioning from a founder/leader-dominated organization to one where the board more rigorously addresses its governance responsibility, or 4) are evolving to the next stage of organizational growth. Just as people change as they learn, grow, and advance through various life stages, so do organizations—and this progression requires essential changes in an organization’s management. A board must ensure that the organization it serves is taking the necessary steps to develop its executive director and, in turn, ensure that the executive director is developing the senior management reporting into the executive director, required to serve the organization’s current and future needs. Boards must be careful to avoid “fighting the last battle” and instead focus on the challenges that lie ahead and the management required to successfully meet those challenges. In other words, the board needs to think beyond the management’s success in handling past challenges and instead address its “readiness and willingness” to face the organization’s near- and long-term future. Often, the “looking back” and the “looking forward” assessments give very different perspectives on management’s strength. The “hard look” suggested above is not easily addressed by boards, whether they are nonprofit or for-profit boards (however, there are market conditions at play in industry that force for-profit boards to do this more naturally). In carrying out this responsibility, the board must strike a difficult balance between ensuring that the organization has the strong management it needs and, at the same time, allowing the executive director the appropriate level of freedom and control over his or her domain. Boards must avoid the temptation to “micromanage” and instead stay focused on their strategic role with regard to governance and stewardship, recognizing that ensuring strong management is vital to both. Indeed, this balance is not easily achievable and requires a high level of engagement and trust, among board members and between the board and the executive director. How many times have we seen a nonprofit organization make a commitment to grow or change, e.g., launch a major capital campaign, build or purchase a building or facility, or expand by opening a new center in a different geographical area, with little or no attention to the new and different management skills that growth requires. Is ensuring strong management a responsibility of the board? Yes. Is this delicate territory? You bet! What can a board do to ensure that the organization is strengthening and aligning management—the executive director and his or her senior management—for what the organization needs? Recognize that ensuring strong management relative to the organization’s current needs and future plans IS a board responsibility. As apparent as this statement may be, it falls into the category of “eminently obvious, once stated.” Many nonprofit boards (especially those with leader-dominated organizations that are not yet functioning as governing boards) tend to see this as the responsibility of the executive director. Often, board members don’t realize that this is new territory for their executive director, and that he or she may not yet understand the need or know how to address it. One of the classic ways this dilemma manifests itself is in the need for financial oversight, integrity, and accountability. Oftentimes the executive director does not recognize when the organization has reached a stage where the financial requirements demand the experience and more sophisticated skill set of the Chief Financial Officer role, which is very different in scope from the skill sets typically offered by the more tactical role of a controller, finance manager, or business manager (all of which are easier for the executive director to deal with, which makes the transition even more difficult). Actively manage board composition so there are several members with executive experience (in both leading and building organizations). Having several members on the board with demonstrated senior management experience will allow the board—formally and informally—to add value as counselors and advisors to the executive director. But be careful that their experience fits the organization’s management need and stage. One of the great growth experiences I enjoyed in my business career was the insight and counsel of board members who brought diverse executive experience and, more importantly, the experience that “fit” relative to where we were taking the business—as we went through yet another organizational life cycle stage. I can’t begin to tell you how many times I realized how much I didn’t know and how thankful I was to have the invaluable advice that helped me and the firm navigate through difficult times and in areas where we had no previous experience. Sometimes the contributions were basic, like creating compensation policies that made sense for a larger organization. Sometimes they were pragmatic, for instance, giving me a valuable perspective in thinking through the types of experienced executives the organization’s planned growth would require. And sometimes they were challenging and well beyond the scope of my experience, for example, opening up our first operation in the Far East. Encourage those on the board who bring executive business experience not to “check their brains at the door.” Too often, directors, especially those from business, don’t fully appreciate the importance of their skills and experience and how much value they bring to the successful management of the nonprofit. A highly engaged board, with the right experience for the organization’s life cycle stage, allows the executive director to greatly improve and grow the management effectiveness of the organization. Provide for the continued growth and development of the executive director to ensure that his or her skills and experience are in line with the demands of the organization and its mission relative to the organization’s stage of growth. One of the most difficult realizations for CEOs in business and executive directors in nonprofits is that you’re never “there.” The CEO or executive director must continue to learn, grow, and develop as the management needs of the organization change and the expectations of its leadership changes. Specifically, a board can: --Recognize and place a focus on executive development, and hold the executive director and itself (the board) accountable. --Set clear direction and goals, including executive development for the executive director and conduct a formal assessment of the executive director’s annual performance, with a major focus on how well the executive director is developing and how well he or she is developing a strong management team (see below). --As mentioned earlier, ensure that several members of the board bring strong, demonstrated executive leadership and organizational management skills to provide moral support, advice, and serve as a sounding board for the executive director. If the executive director hasn’t identified his or her own confidante(s), the board should make certain there are members willing to take on this role, encouraging the executive director to engage these “informal advisors.” However, in order to ensure that the relationship is effective, the process cannot be imposed and must happen organically in order to build trust between the executive director and his or her confidante(s). Place a high priority on the executive director to build strong second-tier management. This must be established by the board as a key priority for the executive director so that he or she brings into the organization the skills and experience required to meet current and future organizational demands. At the same time, the board must help the executive director maintain a balance between bringing in the needed experience from outside the organization and developing strong candidates internally to help preserve the institutional knowledge and organizational culture (assuming that culture change is not a desired outcome). Nurture a culture of “hiring up” where the executive director is encouraged and supported to hire and develop a management team by recruiting individuals that have the proven management experience the roles require, relevant skills, complementary experience, when possible, and an ability to constructively “push” the executive director to help develop and expand his or her management horizons. Support the executive director in this recruitment and development by first recognizing that he or she may not be in position to do this alone, and acknowledging that “hiring up” can be uncomfortable. Have several members of the board—ideally the confidantes mentioned earlier—assist in the recruitment and help define development plans. In my career, I have found this to be of great benefit. Finally, recognize that this may mean increasing compensation levels (along with the required increase in salary budgets to support those increases) to attract the most qualified candidates for positions like CFO, COO, and the head of fund development. Give thought to succession planning and ensure there is a second-in-command. Succession is not a comfortable topic for most people to address, but it is extremely important to have a plan in place before an organization really needs it. This is an area where it is good to “expect the best, but prepare for the worst.” I suggest considering this at two levels. --Strategically: What would the board do if the executive director resigned, was terminated, or was incapacitated for a long-term period? Would a board member assume control while a search is launched? Would a strong second-in-command be named as an interim executive director during the search? Would a board member and second-in-command partner to fill the role? Would an outsider be brought in to hold things together during the search process? To this end, it is important the board be prepared. And, it is not impractical for the board, from time to time, to develop a short-list of ideal candidates, which is a great asset during an emergency. --Operationally: At the very least, the board and the executive director should have a member of senior management assigned as the “person in charge” if and when the executive director is away. And, this designation should be known by the board and senior management. Having a designated person with the ability (and authority) to keep the organization running with reasonable continuity is important. Recognize when it may be time for a change in leadership. One of the most difficult tasks nonprofit boards face is recognizing when a leadership change should be considered. There is a time in the life cycle of most nonprofits when the fierce activism, advocacy skills, or strong programmatic skills—typically hallmarks of a founding executive director—may not be the skills needed for the organization’s current and future challenges, e.g., expanding services to new centers in different communities. Similarly, an executive director’s strong educational, clinical, or child development experience, which provided the expertise and energy necessary to develop the organization’s services, may not transfer well to fill the managerial, administration, fund development, and stakeholder relationship management roles that an executive director of a changing organization may need to assume. Realize, however, that there is no clear or obvious “right” answer. It may be that the aspirations an organization has for itself can only succeed with a leadership change. It may mean that the board will need to better align its aspirations to fit with what the executive director can and wants to do. It may mean that the executive director takes on a new role more consistent with his or her interest and competency. For example, in technology firms, some founders relinquish management to a CEO or president who is better equipped to provide the managerial rigor and necessary experience, while the founder assumes a leadership role like Chief Technology Officer, to set technology policy and direction, while continuing to interface with the board and management. As nonprofits seek to do more for those they serve and/or take on new challenges, their ability to plan for the future, make decisions within a different context, execute effectively, manage relationships, and communicate what they do are the staples of good management. And, as nonprofits change, great community leadership must be augmented and supported with strong management and with a board that takes an active role to ensure and support this change. In closing, I would hope that we not lose sight of, and that our actions continue to be motivated by the real purpose—the children and families being served. Good boards, strong management, executive development, and organizational effectiveness are all means to an end, and not the end in and of themselves. It is all about improving the lives of children and families, and collectively building stronger, better communities. -Mario Morino Back to top



		VPP Enters Bridge Investment Agreement with BGCGW VPP has entered into a Bridge Investment Agreement with the Boys & Girls Clubs of Greater Washington (BGCGW), a multi-service youth organization providing after-school academic enrichment and athletic activities to 35,000 children throughout the National Capital Region. For more than 118 years, BGCGW has been making a positive difference in the lives of area youth, helping boys and girls of all backgrounds (with an emphasis on "at-risk" kids), build confidence, develop character, and acquire the needed skills to become productive, civic-minded, and responsible adults. After ten years as the President and Chief Executive Officer of BGCGW, Pat Shannon is retiring in April 2005. She has worked tirelessly for the past decade to ensure a better future for numerous kids who otherwise would have fallen through the cracks. The bridge investment of $450,000 represents a total VPP commitment to BGCGW of $900,000 plus strategic assistance from the VPP team and network. Through VPP's original investment of $450,000, BGCGW has undertaken a rigorous business planning process over the past year and, as a result, is well-positioned to move into a new chapter of growth, deepening and strengthening programs to ensure positive outcomes for kids in the clubs. The bridge investment will provide capital and strategic assistance to enable BGCGW to recruit a new CEO and provide for one year's salary and benefits. VPP envisions this bridge investment as an important stage in the evolving relationship that is developing and growing between BGCGW and VPP. Bill Eacho, Acting CEO of BGCGW, said, "The Boys & Girls Clubs of Greater Washington is at a crucial point in its history. Pat Shannon has been a tremendous leader, growing the organization significantly during her tenure, including successfully overseeing the merger of the Boys & Girls Clubs and the Metropolitan Police Boys and Girls Clubs. Finding her successor will be a significant challenge and VPP's assistance and support is critical to our success." Back to top

		Heads Up: Progress Report and Continuation VPP and Heads Up have completed a review of the fourth year of their strategic investment and have signed a continuation agreement for the fifth year of the investment partnership based on the progress Heads Up has achieved. Heads Up, VPP's first investment partner, provides quality after-school and summer education and enrichment programs for children and youth, and a unique service program for local university students. Since the partnership began in 2001, Heads Up has more than tripled the number of children served to 1,011 and has nearly doubled their number of sites, expanding to four new locations, for a total of 10 sites. In the past year, Heads Up has made excellent progress in reshaping its management team with the hiring of a qualified Chief Operating Officer; adding key members to the board; continuing to reshape their delivery model; significantly strengthening their curriculum, evaluation processes, and program management; and identifying and securing additional funding through No Child Left Behind legislation and the CharityWorks competition. They have also attracted the attention of both Scholastic Books, who donated many of the books used in Heads Up's programs, as well as Michaels Inc., who entered into an innovative partnership with them in 2004. Both partnerships are the result of strong relationships between Executive Director Darin McKeever and Heads Up board member Jack Davies and Heads Up supporter Richard Hanlon, both VPP founding investors. Darin McKeever reflected on the past four years of the Heads Up and VPP partnership. "Heads Up's growth over the last several years can be measured in the number of kids and college students we involve or the schools with which we partner, and Venture Philanthropy Partners' support has been critical to our achievements in this respect. Yet it may be growth in a second respect where our relationship will have its most lasting impact. I believe there has been a more expansive idea of growth at work within Heads Up that is, at times, even more important—one that embraces not only the numbers of families served but the quality of the services delivered, the maturity of our operations, and the thoughtfulness we bring to our organization's development and the volatile policy and programming environment in which we live," he said. In consideration of their performance to date and projections moving forward, Heads Up and VPP have agreed to the following: increase the number of children served year-round from 865 in 2004 to 1,200 children in school year 2005-2006 (a 40 percent increase); and from 760 children in 2004 to 900 children (an 18 percent increase) in the summer of 2005. A key initiative for the coming year will be the achievement of the goal, while ensuring that the quality of the program remains consistent with the current high standard. In the coming year, Heads Up will examine a variety of options to grow their model, including finding new sources of scalable funding. Back to top



		VPP Founding Investors "Do Well and Do Good" Steve Case, the Co-Founder of AOL and a VPP Founding Investor, will be addressing the 6th Gathering of the Social Enterprise Alliance, the largest educational and networking event for social enterprise practitioners, funders, and technical assistance providers across North America. The gathering will be held April 17-20 in Milwaukee, Wisconsin. Case has been a strong supporter of social entrepreneurship through the Case Foundation and has spoken publicly of his plan to create businesses that "do well and do good." The first gathering of the Social Enterprise Alliance, in November 1998, was convened by six nationally known advocates of social entrepreneurship, including Bill Shore and Gary Mulhair, both of whom were instrumental in the founding of VPP. Joe Robert, Chairman and CEO of JE Robert Companies, Chairman of Fight for Children, and a VPP Founding Investor teamed up with his old friend Quincy Jones to produce Rockin' the Corps, a benefit concert for the Marine Corps. The concert, held at Camp Pendleton, California, on April 1, was conceived as a "thank you" for the nearly 25,000 Marines and sailors from Camp Pendleton who have been deployed to Iraq and Afghanistan. Featured performers included Destiny's Child, Ja Rule, and KISS. Robert's son, Corporal Joseph E. Robert III, is currently serving our country as a US Marine. Back to top



		VPP Board Member Ralph Smith Joins Leapfrog Board Ralph Smith, Senior Vice President of The Annie E. Casey Foundation and a VPP Board Member, was just named to the Board of LeapFrog Enterprises, Inc., a leading designer, developer, and marketer of innovative, technology-based learning products and related proprietary content. According to the company’s press release, Steven Fink, LeapFrog's Chairman said, "Ralph brings a background dedicated to the education of children and, in particular to the issues confronting at-risk children, and he is a welcome addition to our nominating/corporate governance committee and audit committee." Back to top

		Of Interest� National Business Plan Competition for Nonprofit Organizations The Yale School of Management - The Goldman Sachs Foundation Partnership on Nonprofit Ventures will host the Third Annual Conference and Awards Ceremony on June 9-10, in Jersey City, NJ, showcasing 20 finalists in the National Business Plan Competition for Nonprofit Organizations. VPP Chairman Mario Morino serves on the Advisory Board of The Partnership on Nonprofit Ventures, which educates nonprofits about social enterprise, serves as a mechanism for capitalizing promising profit-making ventures with financial support, and provides intellectual capital to build the practice of social entrepreneurship in the nonprofit sector at-large. The conference will feature presentations by the 20 finalists and master class and workshops taught by experts in the field of social entrepreneurship. Register to attend the event or learn more about the 20 finalists. Reports Focus on Strengthening Nonprofit Organizations Seedco, a national community development intermediary, announced the publication of two new reports on the growing field of social enterprise (businesses that use market-based approaches to generate revenue in support of a nonprofit’s mission). The Double Bottom Line and Profiting from Purpose document findings from Seedco’s Nonprofit Venture Network (NVN), an initiative launched in 2001 with support from the MetLife Foundation to provide targeted technical and financial assistance to nonprofits developing mission-driven social purpose businesses. Popular Government, a magazine targeted to about 7,500 North Carolina state and local public officials, published a two-part series on the Evolution of a Nonprofit in Fall 2004. Part 1: Determining the Organization's Orientation provides a guide for determining a nonprofit organization’s leadership focus, and Part 2: Shifting Orientation from One Person to the Community provides a step-by-step process to use if a shift is desired. Back to top

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