Non-profit boards and rotting fish

“A fish rots from the head down,” according to an old saying. The state shut down Community Action of Minneapolis (CAM), and executive director Bill Davis needs a good defense attorney, but the “head” of this and other non-profit organizations includes the board of directors. Even though CAM is dead, the problems that brought it down continue in other non-profit organizations.

Some of these problems are structural, hard-wired in the “best practices” of non-profit leadership and boards of directors. The structural problems include cronyism, shutting out the staff, and lack of board oversight. Because they are structural, these problems continue, even when a board is made up of good people with the best of intentions.

Problem: Cronyism

The non-profit organization’s executive director usually chooses board members. Since board members serve without pay, convincing people to serve is not easy. Looking for board members among people who already have personal or business loyalty to the director makes sense. All of that adds up to a board inclined to trust, rather than question or criticize, the director.

CAM’s board had problems in recruiting and keeping members, which is common. The state audit reported:

“We found no evidence the board has ever been fully staffed at the minimum level of 15 board members. Currently, the board has four positions that are vacant, and has had at least two vacant positions every year since 2000.”

The audit also noted that the board chair and three members had served longer terms than allowed by law. That kind of close connection is one symptom of cronyism, and may have contributed to failure of oversight. Former CAM staff member Fredda Scobey’s letter to the attorney general says problems went back to 1993, but the board refused to investigate:

“At various times, staff attempted to report the abuses to board members who were part of the political sector. The result was that the reports were conveyed to Mr. Davis and harsh consequences ensured.”

Shutting out the staff

Scobey’s experience is not surprising. Refusing to listen to staff is a best practice for board members, according to many experts. This common view is set out by Marion Peters Angelica in Resolving Conflict in Nonprofit Organizations: The Leader’s Guide to Finding Constructive Solutions:

“Both new employees and board members needed to be told during orientation that the executive director is the point person for the board of directors.

“In some larger organizations, staff are not allowed to communicate with board members. In smaller and more informal organizations, there is no such restriction—but in all cases, the policy should keep the executive director informed of any interactions with board members.”

Jan Masaoka, writing in the magazine of American Nonprofits, acknowledges:

“Opinion is sharply divided about whether and how other staff should interact with board members. Executive directors often feel that independent board-staff contact undermines their authority and creates the potential for staff to give misleading and undermining information to the board. They can also worry that board members will give inappropriate information to staff, perhaps about a lawsuit settlement, a financial problem, or about what’s in the budget for staff raises (or cuts).”

Despite these concerns, Masaoka wrote back in 2011, “there needs to be a way for staff to raise serious concerns about mismanagement or malfeasance at the executive level; in other words, to give staff a legitimate channel other than writing to the attorney general.”

Lack of board oversight

The mess at Community Action of Minneapolis (CAM) started long ago, when leaders put themselves ahead of the people they promised to serve. When money goes to the executive director’s inflated salary, or to golf fees, spas and massages, that’s money not available for energy assistance or job training. That kind of theft from the poor is a sin, and maybe a crime, too. Why didn’t the board see it?

Most people who serve on non-profit boards are concerned with service, not with spreadsheets. That’s a mistake. Ignoring spreadsheets and reports means lack of oversight. In CAM’s case, lack of oversight meant the director could do as he pleased, without regard to the organization’s mission and the people it served.

Understanding what’s going on in an organization requires work — at a minimum, reading and understanding reports and going to board meetings. Reading and understanding monthly reports or spreadsheets or a federal 990 form takes work. Voting to approve these reports after a quick look — much easier.

CAM’s board failure is not unique. CAM’s failure hit the headlines, but only after decades of problems. Most non-profit board failures get buried, sometimes along with the non-profit organization.

Board failure is not the only failure of oversight. Funding organizations and governments also need to pay more attention to who is profiting in non-profits. The CAM failure follows closely on the Minneapolis Public Schools effort to stop payment to Community Standards Initiative, which sounds suspiciously like another non-profit fiasco.

How to solve the problems? I don’t see a simple answer, but there’s good sense in what Tim Salo, wrote in E-Democracy:

“For me, the story about Community Action of Minneapolis, more than anything, is the story about a bully, about how difficult it is to dislodge a bully from a leadership position, and about how few people are willing to take on the very difficult, thankless, time-consuming, task of standing up to a bully.

“My short answer is: I suspect that bullies in leadership positions are more likely to be removed by external forces, such as indictments or investigations, than by those people and mechanisms nominally responsible for providing oversight, such as boards or the organization for which the bully works. If you want to minimize these messes, then I recommend that you spend more money on the agencies that perform audits and investigations. And, support your local newspapers.”