LESSON 30 - Are You Competing Based on Overhead—Really?

Welcome to More Lessons From the Nonprofit Boardroom Blog, a 40-week journey through the new book, More Lessons From the Nonprofit Boardroom, by Dan Busby and John Pearson. Each Wednesday, we're featuring a guest writer’s favorite snippet from the week's topic. David Beroth is our guest blogger this week for the third of four lessons in "Part 8: Boardroom Worst Practices.”  And during this COVID-19 era, the role of the board becomes even more critical. We pray that your board will have God-honoring wisdom as you spiritually discern next steps.

LESSON 30 OF 40: Are You Competing Based on Overhead—Really?
Boards should know the back-story on a ministry’s overhead.

THE BIG IDEA FROM THE BOOK: The giving public often looks at just one piece of financial data to inform them whether a ministry is worthy of their support. This is the ministry’s overhead. 

In the world of nonprofit accounting, this is comprised of General & Administrative expenses and Fundraising expenses. Unfortunately, the calculation for these expenses can be subjective and not a true indicator of how effective a ministry truly is.

It is appropriate to report on the overhead percentage, but to promote it extensively in fundraising material suggests a level of precision that does not exist. 

MY FAVORITE INSIGHTS from Lesson 30, pages 162-165: 
• “Effectiveness and efficiency are not functions of overhead allocations.”
• “Overhead rates are highly subjective and defy precision.”
• According to respected CPA and auditor Michael Batts, “Functional expense reporting is voodoo.” 

MY COLOR COMMENTARY:
When you go to Walmart to purchase a new iron, do you evaluate how much Black & Decker spent for marketing, R&D, accounting, IT, and CEO compensation—to produce the iron? Absolutely not. What is your primary question? Is it worth $29.99 to purchase this iron to meet my ironing needs? The value proposition is whether the price is warranted to accomplish your objectives.

In a similar fashion, the question that should be asked of a nonprofit is whether they are accomplishing their objectives and truly producing a meaningful impact. It should not be focused primarily on internal overhead calculations.

I would rather contribute to a ministry that had a 50% overhead allocation that effectively accomplished their purpose like nobody else—than a ministry that had a 5% overhead allocation that was ineffective. At the end of the day, I want my $29.99 donation to make a difference in someone’s life. 

THIS WEEK’S QUOTES & COMMENTARY BY DAVID BEROTH:

DAVID BEROTH is the CFO of the Billy Graham Evangelistic Association where he has served since 2016. He also does a monthly podcast (as a hobby) to serve other financial leaders. The podcast can be found at Christian Nonprofit CFO. David previously served as the CFO of Seed Company, an affiliate of Wycliffe Bible Translators. He and his wife have been blessed with four boys along with a two-year-old princess, and they live in Charlotte, N.C.

TO DO TODAY:
• Make sure your desired ministry impact is well-defined.
• Spend more time promoting your actual impact rather than polishing your calculated overhead. 
• Visit the ECFA Knowledge Center and read and share the short chapter, Lesson 30, “Are You Competing Based on Overhead—Really?”

NEXT WEDNESDAY: On July 29, 2020, watch for the commentary by John Ashmen on Lesson 31, “Where Two or Three Are Gathered on Social Media. Conflicts of interest always sound more questionable on the internet and social media.”

ORDER THE BOOK TODAY!

BULK ORDERS: Click here. For more resources and to download the book's Table of Contents, visit the book's webpage.

LESSON 29 – The Two Enemies of Sound Board Decisions

Welcome to More Lessons From the Nonprofit Boardroom Blog, a 40-week journey through the new book, More Lessons From the Nonprofit Boardroom, by Dan Busby and John Pearson. Each Wednesday, we're featuring a guest writer’s favorite snippet from the week's topic. Steve Moore is our guest blogger this week for the second of four lessons in "Part 8: Boardroom Worst Practices.”  And during this COVID-19 era, the role of the board becomes even more critical. We pray that your board will have God-honoring wisdom as you spiritually discern next steps.

LESSON 29 OF 40: The Two Enemies of Sound Board Decisions
Avoid being pressed for time and making major decisions remotely.

Noel Tichy and Warren Bennis assert, “The single most important thing leaders do is make good judgment calls.” They go on to say, “With good judgment, little else matters. Without it, nothing else matters.” This should be a credo for every governance body. (Read more in Judgment, by Tichy and Bennis.)

Good judgment is not only about the quality of the final decision. It is also about decisions we make about how to decide. The process for decision making affects the quality of the decision. How you decide, what you decide, matters.


THE BIG IDEA FROM THE BOOK: Many board meetings would be more productive if more attention were given to the setting of the meeting and the time allocated for the meeting.

MY COLOR COMMENTARY:
The most important ongoing decisions boards make fall into four categories: strategy formation, risk management, capital allocation, and talent management. The first three categories (strategy, risk and capital) are interconnected, like three strands of a wire. The fourth category (talent) is like the rubber sheath around the three wires. Attention must be given to how these special categories of decisions are made, regarding the time allotted and the context for the meeting.

Preparing for In-Person Board Meetings
The board chair has a unique responsibility to ensure board members will be informed and prepared for important decisions. I’ve found the following process helpful:

1. Pre-agenda call: One month before each meeting I have a call with the senior executive to discuss the agenda for the upcoming meeting. I ask questions like: What are the most important issues we need to address? What action will the board need to take on these issues? How does this inform collateral material to be included in the board book? Who else from the staff should be available to answer questions? Which topics will require the most time? Where in the agenda (time of day) should these important items be slotted?

2. Pre-meeting check-in: The day of (or before) the meeting I meet with the senior executive briefly to review the agenda, explain how I plan to set up key agenda items, and where we may be able to flex on time if we get off schedule.

All this requires a strong working relationship between the board chair and senior executive. 

Preparing for Virtual Meetings

COVID-19 has disrupted everything, including the normal rhythms of governance. Even outside a pandemic, there are rare occasions where virtual meetings can’t be avoided. When this happens, it’s my preference to limit virtual board meetings to a single, time-sensitive issue. In preparing for virtual meetings I use the following process:

1. Notify the full board about the issue, why we believe it can’t wait until the next board meeting, when they will receive additional information, and the date we agreed to convene virtually to take action.

2. Distribute additional information on schedule to the full board, prepared by the staff with input from the relevant board committee. Encourage board members to contact the staff member or committee chair managing the process if they have questions. I ask the committee chair to notify me if there is confusion or lack of consensus based on inquiries from board members.

3. In the virtual meeting, ask the committee chair to review the executive summary of the prepared report along with their recommendation and allow staff members to provide nuance where needed. I encourage board members to limit their questions to information they will need to make a good decision. 

4. When everyone has had opportunity to engage, I call the question based on the committee recommendation. Since I limit this kind of meeting to critical, time-sensitive issues, I use a roll call process to tally the vote.

Making Emergency Decisions in Advance

The most important decision a board makes is selecting the senior executive—the talent management category mentioned above. That process can be challenging when initiated under the duress of a sudden, unexpected transition. 


Wise boards make as many of these process decisions in advance with a documented succession plan. The decisions about who is responsible for what in a leadership transition should never be made on an accelerated schedule of crisis management in a Zoom call.

THIS WEEK’S QUOTES & COMMENTARY BY STEVE MOORE:

STEVE MOORE is the president of nexleader and Growing Leaders. At Growing Leaders, Steve works with the leadership team to develop and implement the strategy to empower emerging generations with skills to lead in real life. At nexleader, he gives leadership to a growing network of coaches who use the Identity Profile Self-Awareness Tool (IPSAT) to help people discover, optimize and unleash their potential. 

TO DO TODAY:
• Encourage your board chair and CEO to discuss the wisdom in Steve Moore’s blog about limiting virtual meetings to single, time-sensitive issues.
• Are you prepared for a leadership succession? Unexpected transitions are very challenging to address on a Zoom call! Check out the ECFA Governance Toolbox Series on succession planning.
• Visit the ECFA Knowledge Center and read and share the short chapter, Lesson 29, “The Two Enemies of Sound Board Decisions.”

NEXT WEDNESDAY: On July 29, 2020, watch for the commentary by David Beroth on Lesson 30, “Are You Competing Based on Overhead—Really? Boards should know the back-story on a ministry’s overhead.”

ORDER THE BOOK TODAY!

BULK ORDERS: Click here. For more resources and to download the book's Table of Contents, visit the book's webpage.

LESSON 28 – Defending Risks Everywhere Is Not a Strategic Plan

Welcome to More Lessons From the Nonprofit Boardroom Blog, a 40-week journey through the new book, More Lessons From the Nonprofit Boardroom, by Dan Busby and John Pearson. Each Wednesday, we're featuring a guest writer’s favorite snippet from the week's topic. Mike Clabaugh is our guest blogger this week for the first of four lessons in "Part 8: Boardroom Worst Practices.”  And during this COVID-19 era, the role of the board becomes even more critical. We pray that your board will have God-honoring wisdom as you spiritually discern next steps.

LESSON 28 OF 40: Defending Risks Everywhere Is Not a Strategic Plan
You must discuss the risk elephant in the boardroom.

THE BIG IDEA FROM THE BOOK: In Lesson 28, the authors make the point that all organizations take risks but, sadly, too many boards do not have an effective, proactive approach to discussing and identifying the significant risks they face. 

There are several reasons why risk assessment seldom gets onto the board’s agenda, but the result is the same. When not planned for in advance, the crisis, when it comes, will exact a high price for the organization having been poorly prepared.  

MY FAVORITE INSIGHTS from Lesson 28, pages 152-156:
• “Fortunately or unfortunately, the one predictable thing in any organization is the crisis. That always comes.” (Peter Drucker)
• Which reminds me of this: “It is not enough that we do our best; sometimes we must do what is required.” (Winston Churchill)

MY COLOR COMMENTARY:
Don’t let these reasons cause your board to ignore, overlook, or simply never get around to assessing and prioritizing the most critical risks your organization faces:

1. We don’t ever put it on our agenda, so we never discuss it.
2. We assume we have no risks.
3. We assume all risks are equal.
4. We fail to get input on risks from the staff.
5. We don’t budget for risk mitigation, so we don’t talk about it. 

THIS WEEK’S QUOTES & COMMENTARY BY MIKE CLABAUGH:

MIKE CLABAUGH is the Founder, retired President and CEO, and current Board Chair for TenfoldBPO, an organization that provides back‐office services to multiple faith‐based not‐for‐profits. Tenfold generates economies of scale and operational efficiencies so that the money saved can be directed toward Kingdom work. Mike now provides board governance training and consultancy services to a broad range of Christian nonprofits and Christian-owned for-profit organizations. Contact him via email by clicking here.

TO DO TODAY:
• Add risk assessment to the agenda for the next board meeting and keep it on the agenda until a satisfactory plan has been developed and put in place. 
• Ask the CEO to bring staff input to the discussion with the board.
• Visit the ECFA Knowledge Center and read and share the short chapter, Lesson 28, “Defending Risks Everywhere Is Not a Strategic Plan.”

NEXT WEDNESDAY: On July 22, 2020, watch for the commentary by Steve Moore on Lesson 29, “The Two Enemies of Sound Board Decisions. Avoid being pressed for time and making major decisions remotely.”

ORDER THE BOOK TODAY!

BULK ORDERS: Click here. For more resources and to download the book's Table of Contents, visit the book's webpage.

LESSON 27 – Address Absentee Board Member Syndrome

Welcome to More Lessons From the Nonprofit Boardroom Blog, a 40-week journey through the new book, More Lessons From the Nonprofit Boardroom, by Dan Busby and John Pearson. Each Wednesday, we're featuring a guest writer’s favorite snippet from the week's topic. Tom Beaumont is our guest blogger this week for the fourth of four lessons in "Part 7: Boardroom Best Practices.” And during this COVID-19 era, the role of the board becomes even more critical. We pray that your board will have God-honoring wisdom as you spiritually discern next steps.

LESSON 27 OF 40: Address Absentee Board Member Syndrome
There are three unhealthy ways that many ministry boards respond to empty chairs at board meetings.

THE BIG IDEA FROM THE BOOK: In Lesson 27, the authors address the all too common problem of no-shows at a scheduled board meeting. From “I hope we have enough for a quorum today” to “I wonder where Joe is, I thought he was coming,” absenteeism is very real and needs a real remedy. Ignoring the empty seats (as tempting as that is) will not result in a healthy board environment.

So what is? Well, part of the answer is recruitment and part of the answer is engagement. Preparation is critical, as is structure. But the root of the remedy is found in motivation and motivation springs from a clear answer to the question, “Why am I here?”

MY FAVORITE INSIGHTS from Lesson 27, pages 146-150:
• “Leverage a re-commitment time each year with an annual affirmation statement.”
• “Engage the board with an engaging agenda.”
• “No one should be surprised that absenteeism will be addressed when necessary and in a God-honoring way.” 

MY COLOR COMMENTARY:
In the world of camp it is often said, “to bore a kid is a sin.” In the world of the boardroom, total absence of boredom is unachievable (sorry). But what can be achieved is good preparation. The first step in keeping butts in boardroom seats is to be ready, organized, and professional in your planning. Lack of pre-meeting information and in-meeting structure and post-meeting follow-up invites un-involvement.

Engagement, however, is the key. I don’t know how many times I have described board members as either being “engaged” or “not engaged.” It’s the difference between being a bump on a log or on the edge of your seat. It changes board meeting time from being a matter of endurance to an expectation of contribution. Engagement is the posture of members knowing that their absence creates a hole that won’t easily be filled and will, in fact, lessen the effectiveness of the board.

Maybe that kind of engagement seems unattainable. But even the smallest measure of it requires motivation. Board members need more than a sense of duty to get them to a meeting and engaged in it. They need to not only love the ministry they are in (that’s the easy part) but know they are critical to its success. They need to grasp that the spiritual objectives carried out by those in the trenches (the staff) must first be grounded in good governance (the board)—and that is a very high calling. 

THIS WEEK’S QUOTES & COMMENTARY BY TOM BEAUMONT:

TOM BEAUMONT is the CEO of The Firs Bible and Missionary Conference, a multi-site, multi-ministry focused on camps and retreats that will celebrate its centennial in 2021. Tom has served at The Firs for almost 36 years with over 40 years in full-time Christian camping. Tom and his wife, Mary, live in Bellingham, Wash., and have three grown children in Oregon and Washington. He has been associated with CCCA (Christian Camp and Conference Association) his whole career and currently serves on the CCCA board of directors as vice-chair.

TO DO TODAY:
• Have the right person with the right skills and the necessary time to serve in the critical position of board chair.  
• Work on achieving greater clarity in regards to board meetings, responsibilities, and mission. 
• Visit the ECFA Knowledge Center and read and share the short chapter, Lesson 27, “Address Absentee Board Member Syndrome.”

NEXT WEDNESDAY: On July 15, 2020, watch for the commentary by Mike Clabaugh on Lesson 28, “Defending Risks Everywhere Is Not a Strategic Plan. You must discuss the risk elephant in the room.”

ORDER THE BOOK TODAY!

BULK ORDERS: Click here. For more resources and to download the book's Table of Contents, visit the book's webpage.

LESSON 26 - Big Rocks, Pebbles, and Sand

Welcome to More Lessons From the Nonprofit Boardroom Blog, a 40-week journey through the new book, More Lessons From the Nonprofit Boardroom, by Dan Busby and John Pearson. Each Wednesday, we're featuring a guest writer’s favorite snippet from the week's topic. David Ingerson is our guest blogger this week for the third of four lessons in "Part 7: Boardroom Best Practices.” And during this COVID-19 era, the role of the board becomes even more critical. We pray that your board will have God-honoring wisdom as you spiritually discern next steps.

LESSON 26 OF 40: Big Rocks, Pebbles, and Sand
Ministry boards have a natural gravitational pull toward issues that should be reserved for the staff.

THE BIG IDEA FROM THE BOOK: In Lesson 26, the authors note that boards which are not disciplined to focus on the big issues, or “big rocks,” are destined to mediocrity and inefficiency. The board must allow, and insist, that the staff handle the minor issues, “small rocks, pebbles, and sand” in order to reserve their attention, time, and wisdom for the larger issues that are worthy of their focus.

MY FAVORITE INSIGHTS from Lesson 26, pages 140-145: 
• “If rocks, pebbles, and sand are analogous to the various issues that ministries must address, they are all important at some level, but it’s just the big rocks that should be on the agenda of the board.”
• “The board chair, vice chair, and CEO must build into the board’s DNA a stewardship conviction that big rocks are their focus.”
• “If the board agenda includes smaller rocks, pebbles, and sand, there is no hope (or time!) for the board to focus on big rocks.”

MY COLOR COMMENTARY:
Just as the tragedy of the Vietnam Conflict, for the USA, was understood to have been caused by the president and his then-secretary of defense, in 1963, diverting the joint chiefs’ attention from strategic thinking and planning, so a ministry board that distracts its focus from vision and strategy and instead zeros in on specific budgetary line items—operational, pebble/sand issues—will likely also lose the war and fail to effectively accomplish their mission, or at the very least, make successful mission accomplishment all the more elusive.

The hard-working ministry staff will likely appreciate the top-cover a board provides by dealing with strategic issues, the large issues—big rocks. An efficient staff will likewise feel unappreciated and devalued when the board diverts its attention from the large issues (big rocks) and micromanages the tasks they are assigned—thus distracting themselves from big rocks to focus on pebbles and sand.

A board that insists on focusing on the operational, day-to-day duties and issues, pebbles, and sand—instead of the larger issues that actually makes up their charter—will leave the staff feeling not only second-guessed, but also untrusted and unprotected at the all-important strategic level at which the board is supposed to govern.

Listen up, boards! Give your staff a break—don’t try to do their job! Instead provide the strategic top-cover they long for, so they can fully explore and exploit their commitment and creativity for accomplishing the mission. 

THIS WEEK’S QUOTES & COMMENTARY BY DAVID INGERSON:

DAVID INGERSON is the president/CEO of Christians in Action Missions International (CinAMI). His passion for evangelism and disciple-making commenced at his conversion to faith as a freshman at the US Air Force Academy after hearing Astronaut Jim Irwin share his testimony at the Academy Cadet Chapel. After 20 years serving as an Air Force pilot and officer, David spent 12 years initiating and operating several for-profit enterprises. Having traveled to 75 countries, David fervently loves learning about other cultures and how to best communicate the Gospel in their contexts. His mission, CinAMI, has approximately 80 workers making disciples in 21 countries. David and his wife, Kathleen, along with Deborah, their youngest of five children, make their home in Fresno, Calif. He is the author of The Caleb Years: When God Doesn’t Make Sense.

TO DO TODAY:

• Use the big rocks, pebbles, sand, and water illustration at your next board meeting. Accomplish the jar-filling exercise twice. First time: put the sand in first, then the pebbles, then attempt to put in the big rocks. You should be able to put in only one or perhaps two big rocks—show the “left-out/no-room” rocks. Try to “pack” them in—clearly showing it’s impossible. Second time: put in the big rocks, then the pebbles, then the sand, and finally the water and be sure ALL go in—vividly demonstrating the all importance of starting with the big rocks FIRST, or you won’t be able to get the big rocks in!

• Inspire your CEO and board chair to review your agenda together before your next board meeting. See if you can find any small rocks, pebbles, or sand—and make a commitment to scrub each agenda for future meetings, or until you succeed in incorporating nothing except big rock issues to take to your board. It will be a refreshing and liberating feeling!

• Visit the ECFA Knowledge Center and read and share the short chapter, Lesson 26, “Big Rocks, Pebbles, and Sand.”

NEXT WEDNESDAY: On July 8, 2020, watch for the commentary by Tom Beaumont on Lesson 27, “Address Absentee Board Member Syndrome. There are three unhealthy ways that many ministry boards respond to empty chairs at board meetings.”

ORDER THE BOOK TODAY!

BULK ORDERS: Click here. For more resources and to download the book's Table of Contents, visit the book's webpage.