Wednesday, April 30, 2014

Drafting the Ideal Team: Risk Lessons from the NFL - RISK eNews

April 30, 2014

Drafting the Ideal Team: Risk Lessons from the NFL

Next week is my favorite event of the pro football offseason, the NFL Draft. During the draft, the General Manager of each franchise generally leads the selection of the team’s “draft picks.” Each prospective team member is carefully screened before the GM decides which players will be targeted as new players for the coming season. Every draft pick has the potential to be a star player, a solid contributor, or in some cases, a poor fit.
So how do the NFL’s most successful teams choose their draft picks, and what can nonprofit leaders learn from the process?
  1. Study the Tapes, But Save Time for Candid Conversations

    In the NFL, studying tapes of a player’s past performance is the beginning, but never the end of the screening process. In the new film Draft Day, the fictional GM of the Cleveland Browns has an opportunity to choose a Heisman Trophy-winning quarterback. But rather than basing his decision solely on the tapes and trophy, the GM calls other scouts and the quarterback’s college coach to learn more. The time spent talking to people who know a prospective employee is incredibly valuable. Keep in mind that a prospective employee is motivated to tell you what they think you want to hear. References are an opportunity to hear about the prospect’s skills, talents and weaknesses from another source. Don’t be cynical about reference checks! Always allot sufficient time in your screening process to talk to people who truly know your top candidates.
  2. Consider Culture and Rhythm

    Throughout the screening process it’s essential to remember that every new hire needs to fit your culture, and also the rhythm of your nonprofit. In Draft Day, the GM constantly asks prospects what’s most important to them. While some players understandably reply, “winning,” the GM’s clear preference is for players who put family and loyalty over winning ball games. As you design your screening process for key positions, make certain you are screening for culture and rhythm mismatches. Recognize the human tendency to look for information that confirms your initial impressions about a candidate (the confirmation bias), rather than tuning in to information that suggests a mismatch.
  3. Get Your Draft Picks on the Field without Delay

    When asked in 2013 whether he hoped to find immediate starters in the crop of draft picks, Denver Broncos GM John Elway replied, “That's always the goal, to find these guys and get them on the field as fast as we can.” (Source: The Denver Post.) Venture capitalist and author Ben Horowitz echoes this idea in his book, “The Hard Thing About Hard Things.” Horowitz urges leaders to “aggressively integrate” new executives after hire. His tips include:
    • providing monthly, weekly and even daily objectives to help the new hire produce “immediately,”
    • insisting that new leaders get up to speed fast, and
    • providing opportunities for interaction with peers by providing a “list of people they need to know and learn from.”
    Horowitz is a proponent of a 30-day window for new executives, writing that “If in thirty days you don’t feel that they are coming up to speed, definitely fire them.”
Screening and selecting new hires for your mission-focused organization may not seem as glamorous as making draft picks in the NFL. But the consequences are just as vital to the people and communities you serve. By exercising care as you “draft” new team players, you have the best opportunity to fortify your mission for the long term, and add dedicated teammates to your cause.
Arley Turner is Project Manager at the Nonprofit Risk Management Center. She welcomes your comments and questions about risk topics, the Center’s Affiliate Member program, the 2014 NFL Draft or the Denver Broncos. Arley can be reached at (202) 785-3891

Affordable, Convenient Risk Management Training

Each month the Center records a brand-new Risk Webinar featuring up-to-date content on issues that are top-of-mind for nonprofit leaders. The one-time cost for each program is $59, or apply to become an Affiliate Member to enjoy unlimited access to our “vault” of more than 100 hours of risk management training. Frustrated with the limitations of your annual performance review process? Learn what’s new in the field of performance management by purchasing this month’s program on Managing Risk in Performance Management. Next month’s program, on The Insurance Marketplace will be released on Monday, May 5. To purchase any recorded program or peruse the “webinar vault,” visit our 2014 Webinars page today.

New Sessions Added to Upcoming Risk Conferences

The conference programs for the Center’s 3 risk-themed conferences are taking shape! We invite you to browse the schedules, workshop descriptions and registration details for each event, by visiting the conference webpage. To suggest a topic for the Risk Summit in Chicago, click here.

Risk Webinars

Fit-to Suit Risk Policies

My Risk Management Policies, Version 2.0 helps you create custom risk policies for your organization in a matter of minutes. Need well-written policies? This cloud app makes policy drafting easy. After completing the quick registration process, search by keywords, categories or peruse an alphabetized list of 150 templates. Each template offers many options to consider. Some of the templates force you to make practical choices. For example, you might prefer an informal style over formal language. Or perhaps you want to strictly prohibit something that other nonprofits allow! With My Risk Management Policies, Version 2.0, custom-fitting policy language to suit your nonprofit is easy and dare we say… fun!
Version 2.0, What’s New?
We’re excited to announce some terrific new features, plus a bold new design. Many of the new features were developed with client feedback in mind. You spoke and we listened!
  • Multiple users, one account— The new version has two levels of users: Account Holder and Added User. This means that two or more staff from one organization can collaborate on the drafting of policies. Want to get your outside counsel involved? No problem! The Account Holder for your nonprofit may grant system access to expert advisors through the “added user” feature.
  • Policy drafting tips — We’ve added policy drafting tips at the top of many templates. This is our chance to offer a few hints from our years of experience drafting and editing risk policies for nonprofits!
  • More policies than ever before — We have added nearly 50 new policy templates and updated many of the templates in the first version, and we’re not stopping there! As always, we welcome your suggestions for new policy types, new policy language, policy options and more. Send your requests
To begin developing customized Risk Management Policies for your nonprofit,click here.
The one-time licensing fee for My Risk Management Policies is only $179 or just $29 if your nonprofit is an Affiliate Member of the Nonprofit Risk Management Center.

Pass it On!

If you enjoy reading the Center’s Risk eNews and know others who would as well, please use the Forward email link that appears at the bottom of this issue. The link offers an easy way to share this issue with a colleague. When you use the link your colleague will receive an invitation to subscribe.
© 2014 Nonprofit Risk Management Center

Navigating a Nonprofit Corporation through Bankruptcy

The nonprofit sector is an enormous contributor to the American economy, providing 5.5 percent of the nation’s GDP and employing 13.7 million people. Just like for-profit corporations, nonprofits can be susceptible to financial problems and insolvency, and may ultimately seek protection under the Bankruptcy Code (although, unlike for-profit corporations, nonprofits cannot be forced into bankruptcy involuntarily). While there is ample guidance for nonprofit directors regarding their fiduciary duties generally, very little has been written about the duties of directors of insolvent nonprofit corporations.
It is well settled that the duties of officers and directors emanate from state law.[1] Directors are stewards charged with balancing risk and furthering the purpose of the enterprise. The purpose of a for-profit corporation is to enhance the value of the enterprise for the benefit of residual interest-holders, ordinarily the owners of the enterprise. The purpose of a nonprofit corporation is to further the stated mission of the enterprise, rather than to generate wealth for stakeholders.
Some nonprofits have members (nonprofit membership organizations) and some do not (non-member not-for-profit organizations). While in some respects the members of a nonprofit membership organization are like shareholders of a for-profit corporation, in that they elect a board of directors, membership interests in a nonprofit, unlike shares in a for-profit corporation, represent a controlling rather than an economic stake in the enterprise. They cannot be transferred for value like shares of for-profit corporations, and often do not even entitle members to a share of the residual value of the enterprise upon dissolution.[2]
The members of a nonprofit membership organization periodically elect a board of directors, which is ultimately responsible for the operation of the enterprise and the fulfillment of its mission. The boards of non-member not-for-profit corporations are self-selecting and self-perpetuating. The mission of a nonprofit membership organization may either be to advance a charitable or public purpose—as in the case of a nonprofit hospital system, a nonprofit theater, National Public Radio (NPR) or Public Broadcasting Services (PBS)—or to benefit the members of the nonprofit—as in the case of a rural electrical cooperative, a local food cooperative, a university club, a country club, or a professional sports association, such as the National Football League (NFL), Major League Baseball (MLB), and the Professional Golfers’ Association (PGA). The mission of a non-member not-for-profit will be to advance a particular charitable or public purpose.
When a for-profit corporation becomes insolvent, the directors continue to be obligated to preserve (and, if possible, enhance) the value of the enterprise, although the beneficiaries of this obligation shift from the owners to the creditors of the company. Similarly, when a nonprofit corporation becomes insolvent, the directors remain obligated to fulfill their fiduciary obligations as delineated under state law (i.e., to advance the stated mission of the enterprise). While in either case, state law, rather than federal bankruptcy law, will continue to govern a director’s fiduciary duties in a bankruptcy proceeding, a bankruptcy filing will require a board to navigate an entirely new statutory framework while discharging its fiduciary obligations.[3]
In some respects, a bankruptcy filing will shift the landscape to provide greater power to creditors. For example, in a bankruptcy case a debtor will be required to provide a greater level of transparency regarding its financial condition and operations than is ordinarily required. Soon after the filing of a chapter 11 case, a representative of the Office of the United States Trustee (a branch of the Department of Justice) will solicit indications of interest from unsecured creditors in forming an official committee. If a sufficient level of interest is shown, a committee will be formed, which may retain legal and financial professionals at the debtor’s expense and will act as the creditors’ watchdog in the chapter 11 process. During bankruptcy, a debtor will be required to seek court approval, after providing creditors with notice and the opportunity to object, before taking any action that is not in the debtor’s ordinary course of business. Bankruptcy will also provide creditors with remedies for addressing director malfeasance that are not ordinarily available, such as replacing the debtor-in-possession with a trustee or examiner, subordinating a director’s claim under section 510(c), converting the case to chapter 7 (if the debtor is not a farmer or a nonprofit), and objecting to plan confirmation on the basis of improper enrichment of directors.[4]
In other respects, a bankruptcy filing shifts the landscape to provide directors with greater power to deal with recalcitrant creditors. For example, bankruptcy can be used to force a restructuring over a group of holdouts,[5] and a debtor may even strip a creditor of its right to vote on a proposed plan as a consequence of the creditor’s conduct during the chapter 11 case by “designating” or disqualifying that creditor’s vote.[6]

Fiduciary Duties of For-Profit Corporate Boards
The goal of the board of a for-profit corporation is to maximize the value of the enterprise (without subjecting the enterprise to unreasonable risk).[7] Under state law, directors of a corporation generally owe a fiduciary duty to the corporation, including, among other things, to maximize its value. [8]
As set forth in Torch Liquidating Trust ex rel. Bridge Associates L.L.C. v. Stockstill, 561 F.3d 377 (5th Cir. 2009), when a corporation is solvent, the shareholders are the beneficiaries of the corporation’s growth and increased value and have standing to bring actions against directors on the company’s behalf asserting a claim for breach of the directors’ duties to the corporation.[9] When the corporation is insolvent, however, the creditors take the place of the shareholders as the holders of the residual interest in the enterprise, and thus acquire standing to bring derivative actions on behalf of the company.[10] The derivative suit is a powerful weapon for enforcing directors’ fiduciary duties under state law and challenging corporate mismanagement.
It is important to understand that a direct fiduciary duty to creditors does not spring into being upon the insolvency of the enterprise. Rather, creditors simply replace shareholders as the class entitled to commence a derivative action to assert a breach of a director’s state law fiduciary obligations when the enterprise becomes insolvent.[11] While bankruptcy cases often speak of a duty to creditors, that duty is better articulated, as in the Torch Liquidating case, as a continuation of the pre-petition duty of a board of directors to the enterprise, which derivatively redounds to the benefit of creditors when the enterprise becomes insolvent.
Fiduciary Duties of Nonprofit Corporate Boards
Directors of nonprofit corporations have fiduciary duties that to a large extent parallel the duties of for-profit directors.[12] However, unlike the duties of a board of a for-profit corporation, the duties of a board of a nonprofit are not to maximize the value of the enterprise. The obligations of a board of a nonprofit corporation are to the corporation and its stated purpose and mission.[13] While nonprofit corporations do not have shareholders, there are still constituencies who have standing to bring derivative suits, including members (in the case of a nonprofit membership corporation) and directors of the nonprofit.[14] One commentator has even suggested the possibility of beneficiary derivative actions.[15] At the same time, however, federal law and the nonprofit laws of some states provide qualified immunity for uncompensated officers and directors of certain nonprofit organizations.[16]
As with the duties of a board of a for-profit corporation, the duties of a board of a nonprofit do not change when the enterprise becomes insolvent. The board of an insolvent nonprofit need not act like the board of a for-profit corporation and seek to maximize the value of the enterprise in contravention of the entity’s corporate mission. A board of an insolvent nonprofit must remain true to its mission as set forth in its organizational documents. In fact, in forgoing the corporate mission to pursue a path of value maximization, a nonprofit board could expose itself to liability for violating the nonprofit’s organizational documents.[17]
Creditors of an insolvent nonprofit corporation have different rights than creditors of an insolvent for-profit corporation and should not expect nonprofit boards to act like for-profit boards in bankruptcy. For example, unlike creditors of a for-profit corporation, creditors of a nonprofit cannot put the nonprofit into bankruptcy by filing an involuntary bankruptcy petition against it[18] and may not compel a nonprofit debtor to convert its case from chapter 11 to chapter 7 liquidation.[19] Further, while creditors of for-profits in bankruptcy can expect to receive the residual value of an insolvent for-profit corporation unless the debtor is sold or a plan is approved providing for a recapitalization, courts have generally held that creditors of nonprofits are not entitled to the residual value of the enterprise in bankruptcy.[20] This means that unlike in a bankruptcy of a for-profit corporation, managers and directors of a reorganized nonprofit may often retain control of the nonprofit over the objection of an impaired class of creditors.
Creditors that contract with a nonprofit corporation know that they are dealing with an entity that has a mission other than the maximization of the value of the enterprise, and engage with the company with full knowledge that the corporation will be operated on that basis. While such creditors may reasonably expect that a nonprofit board will not intentionally waste corporate assets under any circumstances, there is no basis to expect that a nonprofit board will abrogate its stated mission in order to maximize enterprise value once the company becomes insolvent. While many bankruptcy cases discuss the fiduciary duty of an estate representative to maximize the value of the enterprise for the benefit of creditors, upon closer inspection these cases generally involve for-profit entities whose boards are obligated to maximize value under state law.[21] There is no provision of the Bankruptcy Code that specifically obligates a trustee or debtor-in-possession to maximize the value of the enterprise for the benefit of creditors.[22]
It is instructive that in the context of asset sales (where one might reasonably argue that even a nonprofit debtor should be obligated to maximize value), the Bankruptcy Code places clear restrictions on a nonprofit debtor, which frequently prevent the debtor from maximizing value: (i) a transfer of assets of a nonprofit debtor must comply with whatever applicable non-bankruptcy law governs transfers of property by that nonprofit (i.e., state law, including laws relevant to nonprofits);[23] (ii) a nonprofit debtor may transfer assets to a for-profit corporation only under the same conditions that would apply if the debtor had not filed a bankruptcy case;[24] and (iii) all transfers of a nonprofit debtor’s property under a proposed plan must be made in accordance with applicable non-bankruptcy law that governs transfers of property by a nonprofit entity.[25] The legislative history of these three subsections evidences Congress’s intent to keep in place state law restrictions on nonprofits and “restrict the authority of a trustee to use, sell, or lease property by a nonprofit corporation or a trust.”[26]
State law frames and controls the duties and responsibilities of corporate directors, and often provides qualified immunities for directors of nonprofit corporations. No provision of the Bankruptcy Code preempts any state law concerning the duties and responsibilities of corporate directors, nor are we aware of any state law that modifies a director’s duty when a corporation becomes insolvent. Bankruptcy merely imposes a new overlay of tools to be used and obstacles to be navigated by a board while complying with its fiduciary duties and shepherding an enterprise through the restructuring process.

Announcing The 2014 Field Guide to Software for Nonprofits

Idealware: Helping Nonprofits Make Smart Software Decisions

2014 Field Guide to Software for Nonprofits

How do you know what technology will help increase the reach of your nonprofit? How do you wade through the different options available on the marketplace to find the right one for your needs?
We'd like to tell you about the Field Guide to Software for Nonprofits, our flagship product, which we've newly updated for 2014. This handy reference book to the different types of software available to help your organization will become your go-to guide, whether you're a technologist or tech-averse. 
The Idealware mission is to help nonprofits like yours make smart technology decisions, and the Field Guide is the perfect summary of that mission. Each year we update it to reflect the thousands of hours of research, interviews, and analysis we conduct around nonprofit technology, as well as trends and needs in the nonprofit sector.
Inside the 220-page book, you'll find information on every type of software to benefit your nonprofit. In each section you'll get an overview of the different tools available to you, what you can use them for, the options widely used by other nonprofits, and guidance on where to seek out more information. For the 2014 edition, we've added completely new research and recommendations, up-to-the minute listings of software rates and features, and insight into software and technology on the cutting edge.
We're extremely proud of the Field Guide. Since our inaugural edition five years ago, we've made it a priority each year to provide a comprehensive overview of nonprofit technology at a cost that fits the budgets of even the smallest organizations. You can purchase the 2014 Field Guide to Software for Nonprofits for $19.95 by registering below.

Or, if you want to purchase multiple copies or are ordering from outside the U.S., click here to buy through Amazon.
If you would like your coworkers, network, or grantees to benefit from our research too, remember that we also offer attractive rates for bulk purchases. Contact Laura Quinn for more information.
You received this email because you signed up for Idealware updates. If you are no longer interested in hearing from us,click here to unsubscribe.
Idealware | 1 Pleasant St., Suite 4E | Portland ME | 04101

Monday, April 28, 2014

Comptroller Thomas P. DiNapoli's Weekly News

New York State Comptrollers Weekly News

For the Week Ending April 27, 2014 

DiNapoli: New York on Stronger Financial Footing

New York state ended the 2013–14 fiscal year in the strongest fiscal position in years and was able to deposit $175 million in the Rainy Day Reserve Fund for the first time since 2008, according to a report on the recently enacted state budget released Monday by State Comptroller Thomas P. DiNapoli. Still, the $143 billion budget continues to rely, in part, on temporary funding streams to attain balance.

Comptroller DiNapoli and A.G. Schneiderman Announce Guilty Pleas by Former Met Council Directors for Stealing $9M in Kickback Scheme

New York State Comptroller Thomas P. DiNapoli and New York State Attorney General Eric T. SchneidermanWednesday announced the guilty pleas of William Rapfogel, former executive director and chief executive officer of the Metropolitan Council on Jewish Poverty (Met Council), and David Cohen, also a former executive director of the council. Rapfogel and Cohen both face prison time after pleading guilty to multiple felony charges for stealing, together with other co–conspirators, approximately $9 million from the taxpayer–funded nonprofit organization in a 20–year grand larceny and kickback scheme.

DiNapoli: Major Retailers Agree to Stronger Supplier Oversight

New York State Comptroller Thomas P. DiNapoli Thursday announced that Fortune 500 retailers Dollar Tree and Dillard’s have agreed to new reporting standards that will help ensure greater transparency and safety in their suppliers’ factories. The agreements will help safeguard the companies and their investors against the financial and reputational damage that can result when suppliers fail to uphold recognized standards of labor and workplace safety. As a result of the substantive agreements, DiNapoli has withdrawn his shareholder proposals asking the companies to strengthen their supply chain accountability.

DiNapoli Offers Proposal to Encourage Better Local Government Budgeting

State Comptroller Thomas P. DiNapoli Tuesday announced the introduction of a legislative proposal aimed at helping local governments across New York improve their long–term budget planning. The bill would provide reimbursement from the state to municipalities for costs incurred for hiring financial advisors to assist in the development of multi–year budget plans.

DiNapoli Announces State Contract & Payment Actions for March 2014

State Comptroller Thomas P. DiNapoli announced Monday his office reviewed 2,379 contracts valued at $2.9 billion and approved more than 2.7 million payments worth more than $18.9 billion in March 2014. His office also rejected 202 contracts and related transactions valued at $531 million and 5,036 payments valued at more than $7.9 million due to fraud, waste or improprieties.

Comptroller DiNapoli Releases Municipal Audits

New York State Comptroller Thomas P. DiNapoli Wednesday announced his office completed audits ofCenter Moriches Free Public LibraryTown of HarmonyVillage of HillburnVillage of LibertyMount Vernon Industrial Development AgencyTown of Villenova; and the Westmere Fire District.

Comptroller DiNapoli Releases School Audits

New York State Comptroller Thomas P. DiNapoli Wednesday announced his office completed audits of theDryden Central School DistrictNew Rochelle City School DistrictPort Jefferson Union Free School District; and the Portville Central School District.

Also in the News

Take the Step to Delay the Nonprofit Revitalization

Taking the Necessary Steps to Delay the Nonprofit Revitalization Act 
What are you doing to the delay the date? 

NYCON continues its efforts to delay the Nonprofit Revitalization Act's effective date. Since our last E-newsletter regarding the Nonprofit Revitalization Act, we've made tremendous progress due to our members communicating to local elected officials, signing our petition, and providing us their testimonies.
To advance our position, NYCON will be meeting with the offices ofAssmeblymember James Brennanand Michael Ranzenhofer tomorrow Tuesday, April 29th

We will be outlining key reasons to both offices as to why the Act's effective date should be delayed from July 1st, 2014 to January 1st, 2015. We will also be bringing the petition and testimonies provided by our members regarding the Act.

To support our efforts tomorrow, we ask members to send a letter to
 We encourage you to either send your own letter or use our   NYCON letter as a template  to email/fax to their office.  

We have over 100 signatures on our petition, but we know there are still many more out there who have not yet, so please join our efforts by signing your name. Please remember that anyone can sign this petition, so please feel free to disperse this to staff, volunteers, consumers, or anyone who cares about the sustainability of your organization within the community. Please Sign Our Petition!

You can also join our cause by Sending Us Your Testimony.Help us express why the Act´s effective date should be delayed! If you have any questions about this or any other public policy issue, please feel free to our Program and Policy Associate, Amber Vanderwarker.
64 Days  
Left until the Nonprofit Revitalization Act Deadline 

NYCON's Memo of Revision:

Please read
to learn more about why NYCON is requesting to delay  the Act's effective Date.  

Wednesday, April 23, 2014

Leadership is Hard - RISK eNews

A SOURCE for Tools, Advice, and Training to control risks… so you can focus on your nonprofit’s mission.
April 23, 2014

With Thanks

The Nonprofit Risk Management Center is deeply grateful to the companies that have signed on as Corporate Sponsors of our 2014 risk-themed conferences. In addition to our Corporate Sustainers, we are pleased to report that USLI and The Hanover Insurance Group, Inc. have enrolled as 2014 sponsors. Thank you! Visit our2014 Conferences webpage for location details, conference schedules, and online registration. Contact Kay Nakamura at (202) 785-3891 to discuss partnership opportunities.

Leadership is Hard

This week I’ve been reading “The Hard Thing About Hard Things,” by Ben Horowitz, the former CEO of Opsware, whose company was acquired by HP for $1.6 Billion in 2007. What practical advice might a Silicon Valley tech executive turned venture capitalist have to offer nonprofit CEOs and risk champions? Brutal but helpful lessons from the world of startups, dot coms, and life on the fine dividing line between financial success and disaster.
Like the corporate CEOs referenced in “The Hard Thing About Hard Things,” most of us leading mission-driven organizations awake each morning believing that we run great organizations. We yearn for opportunities to boast about our compelling missions and how we transform lives and communities. But I think Horowitz is right when he says that the true test of that belief is when the organization—and the CEO—have to do something truly difficult.
Here are just a few of the “hard things” I learned from this provocative new book.
  • No Excuses, No Self-Pity – In one of the shortest but most memorable chapters, Horowitz explains that when disaster strikes, “nobody cares.” His advice? Conserve the mental energy needed to rationalize the mess, make excuses for the mess, or engage in self-pity. Use the energy you have to “find the one seemingly impossible way out… Spend zero time on what you could have done, and devote all of your time to what you might do.”
  • Recognize Good from Bad – The opportunity to make a difference is often touted by nonprofit CEOs attempting to lure talented professionals to their organizations. Yet are we being honest about whether our nonprofits—regardless of the warm feelings our mission statements convey—are really good organizations? Horowitz explains that in a good organization, “staff wake up knowing that the work they do will be efficient, effective and make a difference for the organization and themselves. These things will make their organizations both motivating and fulfilling.” In contrast, in a poor organization, “people spend much of their time fighting organizational boundaries, infighting, and on broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not.” Which characterization fits the nonprofit you lead? If you’re not 100% confident that the “good organization” label applies, what steps are you taking to dispense with mission-wasting processes and eliminate the confusion and chaos you need to evolve to good?
  • Take a Hard Look at the Numbers and the White Space – Today’s nonprofit CEOs are becoming increasingly obsessed with numbers. I recall a board meeting more than 10 years ago when one of my business-savvy board members urged our team to conduct an annual “ROI” process. Her suggestion, which seemed novel in 2004, is not an uncommon theme at today’s board table. But Horowitz cautions against focusing on the wrong numbers or looking at them in the wrong way. He describes “management by numbers” as “sort of like paint by numbers—it’s strictly for amateurs.” The frequent mistake that leaders make is to focus on short-term results while sacrificing future opportunities, or “downstream competitiveness.” He urges CEOs to look beyond the black box with the numbers to the intriguing “white space” that explains how the organization achieved those numbers. He reminds his readers that in many cases, qualitative goals may be an organization’s most important ones.
  • Invite Candid Feedback Through One-on-Ones – According to Ben Horowitz, a common mistake made by tech CEOs is to engage in one-way conversations with staff. Whether it’s a performance review, pep talk, or opportunity to make a big announcement, apparently many CEOs prefer to hear the sound of their own voices to hearing feedback from direct reports and the rank and file! Horowitz challenges CEOs to make time for one-on-one conversations with staff. During these one-on-ones, the most important rule is the 90:10 rule: CEOs should do no more than 10% of the talking. Questions to help spark the conversation include:
    • If we could improve in any way, how would we do it?
    • What’s the number one problem with our organization? Why?
    • What’s not fun about working here?
    • What are we not doing that we should be doing?
  • Share Every Burden You Can – Horowitz writes that “It’s easy to think that the things that bother you will upset your people more. That’s not true. The opposite is true. Nobody takes the losses harder than the person most responsible.” The author’s antidote to lonely despair when things go terribly wrong? “Share every burden you can. Get the maximum number of brains on the problems even if the problems represent existential threats.”
Leaders of nonprofit organizations are fortunate that our missions attract smart and passionate staff and volunteers. It’s been years since I’ve heard any CEO complain about having a hard time recruiting top notch staff and brilliant board leaders. With the opportunity to work with and tap the enthusiasm, creativity and dedication of bright people, our missions know no bounds. But despite the talent at our doorsteps, leading a nonprofit requires making hard choices, choosing between sometimes painful alternatives, and never giving up or giving in when the going gets tough. You can reach out for help, look for opportunity in the face of disaster, but you can’t hide. Why? Because your mission deserves your commitment and fortitude to handle the “hard things” that are inevitable in the extraordinary world of nonprofit service.
Melanie Lockwood Herman is Executive Director at the Nonprofit Risk Management Center. Melanie’s calendar of upcoming speaking engagements is available online. Also available are “hot topics” for workshops in 2014. Questions? Call Kay Nakamura at (202) 785-3891 to discuss Melanie’s availability as a keynote or workshop speaker.

Suit Yourself Risk Management Training

Each month the Center records a brand-new Risk Webinar featuring up-to-date content on issues that are top-of-mind for nonprofit leaders. The one-time cost for each program is $59, or apply to become an Affiliate Member to enjoy unlimited access to our “vault” of more than 100 hours of risk management training. Frustrated with the limitations of your annual performance review process? Learn what’s new in the field of performance management by purchasing this month’s program on Managing Risk in Performance Management. Next month’s program, on The Insurance Marketplace will be released on May 5. To purchase any recorded program or peruse the “webinar vault,” visit our 2014 Webinars page today.