Two Conference Reviews: Part 2

2 . Boardsource Annual Convention
Washington DC 17-18 November, 2002

This was a two-day, top-level jamboree of non-profit boards and management, fully packed with plenaries, break-out roundtable and workshops interspersed with numerous ‘networking breaks’. To this European participant — sadly one of very few — this made for a fascinating stock-take of the state of non-profit America fourteen months after 9/11, with many aspects of the debate resonating strongly with the situation on the other side of the Atlantic.

These are manifestly difficult times. The prolonged financial market meltdown over the last 18-24 months, with its dramatic impact on the portfolios of grant makers and endowment-funded institutions, has slammed the breaks on the expansion of the sector, and revealed many cracks in the edifice which the bumper years of the 80s and 90s conveniently papered over.

Amongst the recurring themes, two seemed to loom particularly large:

• Undercapitalisation and the curse of programme-led funding: the sector’s ‘pay as you go’ mentality and the inherent tendency to favour direct mission-related expenditure over organisational overheads (aptly described by one speaker as the ‘compassion paradox’) has been exacerbated by funders’ deep seated reluctance to fund core operational costs. This has conspired against institution building, and left organisational capacity increasingly stretched, with a high ‘burn out’ factor. The erosion of institutional fabric could be covered up by strong cash flow in the good years but has been brutally revealed by the changing climate.
• An emerging leadership crisis: the baby boomer generation, which provided a substantial recruitment pool of highly committed non-profit executives since the 1960s, is approaching retirement age and the pipeline for succession is by no means secured. Across the US, 2-3 million non-profit board seats are said to require filling in the foreseeable future. And recruitment is widely reported as increasingly difficult, at both board and senior executive levels. The explanation: more hassle and stress for less fun and reward. The jobs for executives have become increasingly demanding, in some cases positively daunting, and rarely more remunerative. The demands on boards have also increased from the days before public scrutiny and accountability issues turned the spotlight on the boardroom. This is not to imply any wrongdoing; rather, the unremunerated task of boardroom ‘business as usual’ has become more onerous as it has moved onto the public stage. And then there are deeper shifts in value systems, life styles etc. which have affected people’s willingness and ability to take on the roles. So there are genuine succession issues looming.

Combined, these concerns raise major questions about the future of the sector and some of the fundamental principles that informed its growth over the best part of the last 50 years.

In the ‘Old World’, a response to this sort of challenge would be, more likely than not, a prolonged period of introspection, procrastination (in the hope that the problem might ‘go away’) followed by orchestrated doom and gloom and calls for knights in shining armour.

This, however, is America, where adversity seems to have a remarkably cathartic and regenerative effect — with diagnosis quickly followed by an energetic search for solutions and their wholehearted embrace.

So what responses have the leaders of non-profit America come up with so far?

The first is a wholesale review of the non-profit governance model in all its aspects, including:

• The re-articulation of board roles and responsibilities in terms of strategic direction and a clear delineation of these from the chief-executive’s role;
• Embedding institutional vision and mission at board level (‘start and end your board meetings by reading out your mission’);
• In terms of board composition, moving from predominantly funder-stakeholder representation to goals-driven skills and constituency-based recruitment;
• Embracing the notion of board training and development — in particular in terms of financial literacy and fundraising capabilities;
• Pro-actively addressing succession planning, on a sector wide basis, through mentoring and other means of introducing the next generation to the task well ahead of handover time.

Next is a greater emphasis, in terms of organisational resource allocation, on capacity building. This will mean a cultural shift, and quite a substantial one, within non-profits — ‘it’s not bad to spend money on ourselves’ — but also importantly in the attitude and approaches of grant makers. The conference paraded a few examples of enlightened funders who have explicitly made capacity building measures (in terms of core staff recruitment, training etc.) an eligible purpose for grant applications or allowed the application of overhead allowances to be applied to programme-related grants. This is by no means accepted currency in the foundation world, however, as highlighted by the recent example of the Hewlett Packard Foundation which, in its recent dramatic cost-cutting exercise, decided to axe its pioneering grant programme in this area.

Another aspect of this agenda is taking a harder look at earned income generation through for-profit ventures as extensions of core activities. The strategic importance of earned income lies in its being unrestricted and therefore freely disposable. As demonstrated by a number of compelling case examples (the Ben and Jerry’s ice cream parlours run by an organisation focused on inner-city youth mentoring and skills development, for example), non-profit activity offers plenty of scope for profitable entrepreneurial activity where mission pursuit has produced marketable assets as a by-product — be it in terms of professional skills, a customer base, brand power etc.

That said, opportunities are not evenly distributed and need to be weighed against market/financial risk and potential conflicts with value and mission which embarking upon these ventures often entails. They also require their own adequate capitalisation levels to get off the ground and survive.

In all of these areas of discussion, and there were many more, the power of the approaches or solution presented lay not in any impeccable concept or rationale, but in their evidence-based pragmatics and articulation by people who had thought ahead, gone out and done it, and come back to talk about their deeds with the right mix of conviction, candour and determination to get it ‘more right’ the next time. Therein lies the disarming strength of self-governing, grass-roots civil society.

One footnote: the cultural world was conspicuous by its absence at this gathering, with only a handful of institutions (mostly small and regional) represented amongst the conference’s 300-400 delegates — a matter of chance or a reflection of ‘high’ culture’s innate conservatism (with a small ‘c’) when it comes to challenging the institutional status quo? Sadly, one concludes that the cultural world in America may bear more resemblance to its European counterparts.

Magnus von Wistinghausen
mvwinstinghausen@aeaconsulting.com

AEA Consulting LLC

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