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© National Association of Nonprofit Organizations and Executives

Harnessing the Power of Differentiated Relationship

First Edition ‐ 2018

Author: Kathleen Robinson, Ph.D, CNE, CNC, CDE

Editor: James P. LaRose, D.P., CNE, CNC, CDE

Graphic Design: Gabe Lowe

Published by: National Association of Nonprofit Organizations and Executives, Inc. Copyright © 2018 All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Permissions Coordinator,” at the address below.

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First Edition10 9 8 7 6 5 4 3 2 1


CONTENTSNANOE’s Guidelines 7Acknowledgements 10Value Propositions and Premises 11Introduction 14

Key Practice 1: Build networked relationships 13 The More Well-Known View of Networking 16 Bonding networks 17 Bridging networks 17 Social Impact Investors’ and Nonprofit Scalers’ Discuss Networked Organizations 18 Types of Agreements Made by Networked Organizations 25

Key Practice 2: Build equal and equitable relationships 29 Recent events changed the meaning of these words. 30 Equality 35 Definition of equality 35 Who determines equality? 35 Practicing equality 36 What is it that is equalized in nonprofits? Why? 36 Equity 38 A definition of equity. 38 An example. 38 Who decides what is equitable? 39 Opportunity Equality and Equity 42 Participation Equality and Equity 43 CEOs practice participation equality and equity 44 Dealing with government and for-profit authorities 45 Equality, equity and founder issues 46 Protecting freedoms 47 Equality and equity in grievance practices. 48 Giving freedom to do one’s job 49 CEO performance reviews 49 Do no harm, strive to nourish and flourish 50 Decide and act collectively. 50 Fiduciary duties and practicing equality and equity 51 Capability or Functional Equality and Equity 53 What kinds of capacity do high performing nonprofits build? 54 Relational equality and equity 57 The difference between respect and esteem 59


Coalitions, collaborations, partnerships and relational equality 60 Performance evaluation and relational equality 61 The leadership relational dilemma 62 Real and formal freedom 64 Equality, Equity and Establishing Roles and Responsibilities 66

Key Practice 3: Build engaged relationships. 69

Key Practice 4: Build reciprocal relationships. 73 Reciprocal actions differ from altruistic actions 74 Building a norm of reciprocity in the nonprofit sector 74 Socially justified conditions for nonprofit existence 75 Three important conditions are present 78

Key Practice 5: Build HOT and THINK relationshps. 79 Use HOT communication. 80 Honest communication 80 Open communication 81 Two-way communication 82 Before communicating, THINK! 83

Key Practice 6: Build trusting relationships. 85 Work contexts that build trust 86 “Trust” is 86

Key Practice 7: Build accountable relationships. 89 Accountability is 90 Authority Sources Used by Boards That Shape CEO Performance Expectations 91 Multiple sources are used by various evaluators 96 The type of criteria used to judge CEO performance and CEO behaviors sought. 96 Summary 99

Appendix A: Core Values Expressing Various Quality Relationship Norms 103 United Way Worldwide 103 The Task Force for Global Health 104 Feeding America 106 Salvation Army USA, UK, Ireland 107 YMCA of the USA 108Appendix B: Glossary 111Appendix C: Illustrations of Misleading Views on Equality and Equity 121Author Page: Kathleen Robinson 130Editor Page: James P. LaRose 132



NANOE NEW GUIDELINEHARNESSING THE POWER OF

DIFFERENTIATED RELATIONSHIPS

KEY PRACTICE NO. 1

BUILD NETWORKED RELATIONSHIPS

KEY PRACTICE NO. 2

BUILD EQUAL AND EQUITABLE RELATIONSHIPS

KEY PRACTICE NO. 3

BUILD ENGAGED RELATIONSHIPS

KEY PRACTICE NO. 4

BUILD A RECIPROCAL RELATIONSHIPS

KEY PRACTICE NO. 5

BUILD HOT & THINK RELATIONSHIPS

KEY PRACTICE NO. 6

BUILD TRUSTING RELATIONSHIPS

KEY PRACTICE NO. 7

BUILD ACCOUNTABLE RELATIONSHIPS


NANOE GUIDELINESThe purpose of all NANOE guidelines is to provide nonprofit executives with recommendations for building capacity to grow. High performing executives and those who have studied them have shared lessons learned in leading their nonprofit through growth cycles. A rich literature exists that addresses taking nonprofits to scale and what that means. NANOE’s guidelines forgrowth are patterned after their recommendations.

In this guideline, NANOE discusses the nature and importance of building quality relationships. The primary value of a nonprofit is quality, positive relationships. Building, nurturing and maintaining quality relationships among all internal and external stakeholders are primary responsibilities of the executive team, board and staff. We particularly look at quality relationships in networked organizations because of the growing evidence that they are the engine taking the organization to scale faster and generating greater revenues and capital.

In late 2016 and early 2017, NANOE invited thousands of nonprofit executives to join them as a Governor for the stated purpose of thoughtfully reviewing the first edition of the guidelines for growth and providing detailed feedback on what they thought was important about what was said in each guideline, and what concerned them and why. They told us what ideas were not clear or needed amplification, and identified additional practices needed in each guideline. They suggested additional guidelines and why they should be added, and the ways in which the guidelines helped promote capacity building and growth. Hundreds accepted this invitation to be on the Board of Governors. Governors took this job seriously and provided great feedback. As a result, this guideline on building quality relationships was greatly enhanced and expanded. This booklet is the second of the revised guidelines to be issued. Others will follow as the input from Governors is dealt with and each guideline is revised.

The Board of Governors’ feedback also gave NANOE ideas for future resources and services that would be useful to aid understanding and competence in doing what each guideline recommends. NANOE will use the Governors’ suggestions to plan future offerings and opportunities.

Each guideline discusses WHAT is recommended to spur growth. While case studies and examples are found throughout in the text, appendices, and footnotes, each guideline is not designed to give extensive HOW to do what is recommended. That is beyond the Guidelines’ purposes. We have tried to strike a balance in how much help is given in the Guideline to those less familiar with building quality relationships. The footnotes and appendices give examples and links to some key resources.

This guideline is obviously not meant to be the last word on relationships that aid nonprofit leaders in their growth plans. It is meant to focus conversation about the role quality relationships play in spurring growth.

We avoided the term “best practices”. This term was used for a while to mean rigorous evaluation had been done using state-of-the-art methodologies and designs. Most have stopped using this term and


now use the term ‘evidence-based’ or ‘proven practices’. In some senses, ‘best practices’ doesn’t mean much anymore to federal agencies, policy makers, academics, high performing nonprofit executives, and expert practitioners. However, what is outlined in this guideline does have a considerable research base. We provide some references to this research throughout.

NANOE uses the term ‘guidelines’ because the recommendations are meant to direct attention, mentor those who want to grow, and provide enough guidance for leaders to get resources they need to grow. As said above, the guidelines are based on what high performing leaders have said were the capacity building areas they think were essential to their growth.

We want to offer positive change suggestions. We invite all readers to join the discussion, share what you are doing to build your organization’s relationships and what the results have been. If you are a networked organization, we would love to hear from you to understand your organizational model and its up and down sides. We are also interested in the kinds of legislative, industry standards, tax, organizational, and operational changes needed to make sure that all nonprofits engage in networked relationships so they can reach a scale to truly tackle the social, cultural and environmental issues our nation faces.

The nonprofit sector’s goal needs to be to eradicate issues related to the sector’s causes. It is only when people and organizations can work together in concerted ways that we have a chance to make a difference. We need to determine what role we play in perpetuating, causing and eliminating the issues faced by people, our culture and the environment. We need to create bold objectives of change and the capacity to achieve them.

Social, cultural and environmental issues such as hunger, homelessness, mental illness, substance abuse, ethnic and cultural conflict, ethnocentricity, loss of some species, rise of oceans, and poverty show little signs of being alleviated or corrected. Global environmental issues are mounting. Cultural and arts opportunities for everyone are on the decline. While there will always be room for good people doing good things at a very modest scale, NANOE concentrates its efforts on those nonprofits that truly want to accomplish their missions at a scale that result in these issues being greatly reduced and eliminated, if possible. We need courageous, competent and willing leaders to take their nonprofit to a big enough scale that makes a societal difference!

It’s time to meet need fully and eradicate pervasive social, health, cultural and environmental issues. It’s time to think how we must organize, lead and manage ourselves to do that. It’s time to address whether the nonprofit sector wants to do this and, if not to re-define its role and purpose in society. It is in this spirit that we offer a few guidelines for further debate and discussion. We offer the Guidelines to continue the dialog, not end it.


ACKNOWLEDGEMENTSNew Guidelines for Tomorrow’s Nonprofit are based partially on discussions with thousands of nonprofit executives and board members over more than a forty-year period. These leaders expressed their frustrations with current espoused sector practice standards. They shared what was working, what wasn’t, what needed to change, what philosophies and approaches to practice were off base, and what just had to change to keep them working in the sector. We thank every one of them and hope that their voices are expressed throughout all NANOE Guidelines.

For the past twenty years, many high performing leaders and consultants have told us what it takes for a nonprofit to go to scale and its importance to society. NANOE references many of these works throughout the guidelines. Key thought leaders and associations upon which the relationship guideline’s recommendations are based include: Muhittin Acar, Icek Ajzen, Elizabeth Anderson, N Archer, Jeffrey Bardach, Megan Beck, Robert Bellah, Chester Bernard, P Bloom, Pierre Bourdieu, Evelyn Brady, Kimberley Brown, Marco Caliendo, Kelly Campbell, Don Cohen, Jessica Collett, K Cook, Paul Connolly, Thomas Christiano, Melvin Dubnick, Alnoor Ebrahim, Thomas Ehrlich, David Estlund, Louis Feldstein, Richard Finnegan, Allan Fiske, Frank Fossen, Carina Fourie, Mario Freemont-Smith, Craig Froehle, Francis Fukayama, Virginia Gross, Chao Guo, Peter Hall, Lisa Hazen, Thomas Hazen, Diane Helbig, Robert Herman, Paul Hogan, John Kania, Maxwell Kellenberger, E Kelly, M Kramer, Alexander Kritikos, John Kretzmann, Jessica Lanney, Jimmy LaRose, Kelly LeRoux, A Larson, Berry Libert, Paul Light, Chris London, Richard Madsen, John McNight, Linda Molm, David Oswald, Allen Padgett, Robert Putnam, David Renz, Barbara Romzek, D Schaefer, Sameul Scheffler, Fabian Schuppert, Amartya Sen, E Skloot, Lester Solomon, William Sullivan, Ann Swidler, Sue Patton Thoele, Steven Tipton, Christyne Vachon, Shazeen Virani, Ivo Wallimann-Helmer, Michael Walzer, Heather Wiess, Dallas Willard, Jerry Wind, Nathaniel Wright, Kaifeng Yang, Peter York.

Several organizations’ resources were particularly helpful. We thank them for their steadfast commitment to discuss the strengths, weaknesses and context within which certain quality relationships are built in nonprofits that are growing. In particular, NANOE thanks the following organizations for their work: Americans for the Arts, Boys and Girls Clubs of America, Bridgespan, Edna McConnell Clark Foundation, Cultural Organizing, Feeding America, Forbes, Ford Foundation, Harlem Children Zones, Harvard University’s Kennedy School Saguaro Seminars, Harvard Business Review, Interactions for Social Change, National Council for Nonprofits, National Equity Project, NEO Law Firm, Louisiana Law Review, Michigan Nonprofit Association, Nonprofit Management and Review, Nonprofit and Voluntary Sector Quarterly, Nurse-Family Partnerships, Politics Philosophy and Economics, PolicyLink, PosterEnvy, Salvation Army USA and United Kingdom and Ireland, Save the Children, Stanford Encyclopedia on Philosophy, Stanford Social Innovation Review, TCC Group, US Cooperative Extension Services 4-H Program, United Ways Worldwide, Urban Institute’s National Center on Charitable Statistics, The University of Pennsylvania’s Journal on Business Law, The University of Pennsylvania’s Wharton School, World Vision, Young Nonprofit Professionals Network, Youth Villages, and the YMCA. Their insights are reflected in what is said in this guideline.

NANOE also wishes to thank the members of the Board of Governors who specifically concentrated their feedback on the first edition of this Guideline: Mohamad Albadawi, Kimberley Brown, Paulette Criscione, Linda Dianto, Marie M Dunnam, Bill Genet, Susan D Graham, Joe Hayes, Phyllis A Johnson, Sherry Kelley Marshall, Evelyn Ogletree, Constance Rhodes, Caesar R Richburg, Betty Scott, Debi Tengler, Lillie Willis; Dean Wong, Larry Rubin, Jimmy LaRose for editing this text and Gabe Lowe for graphic design.


VALUE PROPOSITIONS & PREMISESHere are the key propositions and values expressed in this guideline.

• All people affiliated with the nonprofit and who have an interest in what the nonprofit does have the same moral status. Each is equal in moral status to all others.

• People and their personal circumstances affiliated with the nonprofit are also different in many ways. Considering these differences, people and groups are treated fairly and justly. They are treated equitably.

• Nonprofits strive to create a work environment that affords everyone affiliated with the organization fair and just opportunities, access to resources, distribution of resources, participation in determining what and how things are done that affect them, fair and just opportunities to develop capacity so they can develop to their full potential, a social context that operates with integrity, clarity of purpose, processes, roles, responsibilities, and accountability.

• The fastest growing businesses in the for-profit and nonprofit sector are networked organizations. To go to scale, nonprofit leaders increase their networking and become formally networked.

• Networked organizations deliver value through relationships. They create an organizational culture where people are connected to people and transactions of many different kinds occur. They tend to grow revenues faster, generate higher amounts of capital and reserves, and use assets more efficiently. The nature of the relationships among those connected are very different from other kinds of organizations. Leaders see themselves as co-creators. Employees are partners. Measurement of success is based on results. Boards primarily view themselves as representatives of units within the network and their interests and mission. Leaders are open to new ideas and changes in operations and services. The assets created are both tangible and intangible. Leaders change what they do and how they think as they adapt to a networked world.

• People solve social, cultural and environmental problems, organizations don’t. Therefore, the relationships developed among all who have some stake in the nonprofit and its outcomes are the engines that drive actions to solve today and tomorrow’s social, cultural and environmental issues.

• Developing and nurturing quality relationships is foundational to the work of any nonprofit that wants to go to scale. Key relational characteristics include interactions and transactions that are trustworthy, practice equality and equity, are kind, tolerant and respectful of difference, adaptive, reciprocal, engaged, co-creative, collective, representative, communicative, responsive, and accountable.


• All leaders, board and staff, are engaged and committed to the mission and outcomes implied in the mission. Board members and executive staff are representatives of the corporation’s interests, mission, and outcomes. They interact with each other as equals, treat each other equitably, support each other’s work, and co-create the products and services that best achieve mission in the various locations in which the networked organization operates.

• They seek to alleviate social and environmental issues not just service them and do so at a scale that makes a difference in societal trends.

• Everyone’s performance is appraised based on articulated performance indicators which are monitored on an on-going basis. Key operations and service inputs, process and output indicators are also tracked in relationship to outcomes, impacts, and value to the community. The priority of all people’s performance is their contribution towards achieving desired outcomes, impacts, and value.

• In networked organizations, CEO and board performance are based on outcomes, impacts, and value to the community and how responsive they are to internal and external stakeholders’ interests, concerns and ideas.

• Leaders set the communicative tone of the organization. Communication among leaders (board and CEO, as well as all throughout the organization) is open, honest, two-way, truthful, helpful, inspiring, necessary and kind. But, leaders aren’t doormats or passive. They are fearless and courageous in communicating their vision and expecting quality performance, and pursuing innovative ways to achieve goals, often pushing the boundaries of traditional ways of thinking and doing things.

• Leaders set the social tone of the organization. Leaders’ main job is to build strong relationships among networked members and to free them to do their jobs in light of well-defined outcomes, impacts, and values. Everyone knows what’s working and what’s not because the performance indicators are tracked and available online for all to monitor.

• Building strong networked organizations in which resources are created, distributed, and used to alleviate key social, cultural and environmental issues develops the nonprofit’s social capital. When social capital is present, network capital develops, and dramatic increases in economic capital and revenue generation tend to follow.


INTRODUCTIONThe foundation upon which nonprofits grow is quality relationships among leaders and with all internal and external people affiliated with the organization. This guideline discusses the key features present in many large-scale nonprofits that went to scale in sustainable ways.

In 2016, NANOE’s critics said, “there is nothing new” about this guideline. In one sense, that’s true! Some of the ideas presented in this guideline have been around for a long time. However, what is new is that we have a growing literature about the features of nonprofits that have gone to scale. In this literature, key relational characteristics of large nonprofits are evident. These are discussed in this guideline. So, whether the ideas are considered new or not, those that want to grow will benefit from using this guideline to evaluate their nonprofit’s social environment, quality and characteristics. What kinds of relationships characterize your nonprofit? How many of your stakeholders agree with you?In another sense, what is presented in this guide is very new. Ideas may be around for a while, but application may not be widespread. If more built relationships based on the key practices found in this guideline, more would grow beyond the $500,000 budget ceiling level, and would begin cooperating with each other in fundamentally different ways, resulting in more comprehensively tackling today’s and tomorrow’s social, cultural and environmental issues.

Why isn’t the nonprofit sector growing? Yes, the sector has grown in numbers, particularly the charitable or 501c3 section of the nonprofit sector. When looking only at combined levels of assets and revenues, it is an impressive number. The sector is a significant part of the US economy when viewed as a whole.

However, growing in numbers is not as important as growing in scale so that social, cultural and environmental issues are solved and tackled more comprehensively, covering more geography and people. Most of the sector’s individual nonprofits aren’t showing signs of growth in scale. We think two key reasons are that nonprofit executives (board and staff) social and financial capital development capacity is such that growth isn’t happening, and many sector leaders are without the competence to assess their situation and begin building such capacity. All the guidelines in this series address what that means. This guideline addresses the sector’s social capital development challenges.

It is common knowledge that corporations that grow fastest are those that provide a quality work environment. An organization’s social capital is intentionally developed. By examining well regarded nonprofits that have gone to scale and their leadership’s interactions with internal and external stakeholders , one can learn what it means to produce quality social capital that fits a given nonprofit context. Social capital, as with other forms of capital, has value. Staff and leadership turnover is less and public relations is easier to do. More want to belong and contribute. Productivity is usually higher. These are just a few effects of quality relationships in the workplace. Social capital is assessed by determining the value of the networks created and what happens in those networks that do things for each other.


Notions of how a nonprofit is governed, held accountable, exercises authority and management control are shaped by building strong, positive networks of engage people and organizations that practice what is discussed below. It is within this context we will talk about governance, accountability and ethics. Building quality relationships facilitates leadership processes that are fair, just, moral and ethical.When social capital declines in society and in organizations, it affects the development of all other forms of capital (human, economic, and spiritual). Currently, our society is reportedly more divided and lacks cooperation among leaders more than we have seen in recent past times. Values of cooperation, consensus, open discussion, treating each other with respect and tolerance are challenged even by the behavior of our nation’s leaders! Social media platforms are used by many to spew hate, disrespect, degradation, and spread untrue or deceptive reports. One wonders what the short-term and long-term behavioral effects will be on all our basic institutions, including the nonprofit sector. We must learn to build quality relationships. Our democracy depends on it. The nonprofit sector’s health and role depends on it.


KEY PRACTICE NO. 1BUILD NETWORKED

RELATIONSHIPS


KEY PRACTICE NO. 1BUILD A NETWORKED RELATIONSHIPS

Everyone has groups of people and organizations to which they are somehow connected. Two or more people’s networks may have the same people in them, but many who are not. When personal and organizational networks are connected positively, they reveal a rich array of resources (information, goods, services, money, people, organizations, processes) on which a charity can draw. The concept of a ‘network’ has two distinct but compatible meanings in the literature on scale. The first is the more commonly understood idea of people intentionally striving to connect with other people so that affiliations are made, and people get to know of the organization and leaders and their work, and in some cases, projects are done together or community issues are discussed and/or tackled together. Two often heard remarks are “I’m going to join this organization so I can network with members” and “it’s important to build networks so that when I need a job I have a network to contact”. This type of networking is usually a combination of fairly casual acquaintances to more long-lasting, in-depth interactions. They can be friendship interactions without related organizational connections.

The growing literature on scale and capital development within nonprofits uses the term network quiet differently. Among these leaders, a network is formal, legally binding relationships among organizations that agree to pursue the same mission, often agreeing to a basic set of common service delivery and operational processes, organizational structures, and shared resources.

The More Well-Known View of Networking

High performing nonprofit leaders do seek connections with other organizations and leaders. They personally intentionally join associations to stay connected with leaders. They work on joint projects. They share resources and customers. They sometimes stop providing one type of service because another organization is doing that and intentionally discuss their dependency on other organization(s) to provide certain services or resources such as facilities. YMCAs and YWCAs often are recognized by other nonprofits in a community as being essential to their success. Reduce funding to the Ys and funders have unintentionally harmed several other nonprofits reliant on the Y’s services, facilities and resources. Some nonprofits also participate in their region’s or community’s human services council where community social issues are discussed and, sometimes, some build cooperative projects together to tackle and solve some issues, or at least provide services to those facing the issues.

In the “us and them” mix; bonding networks are the “us”. It is easier to form partnerships with people and organizations who are like “us” in many ways. Usually, the conversations can go deeper faster and act to reinforce and further inform already existing beliefs, values and prized actions. Culturally, the beliefs, values and rules for individual and organizational behavior are much the same. People in bonding networks have many of the same value priorities. Certain fundamental beliefs, values or practices are non-negotiable, even if they can’t make them work in their leadership practice.


However, only associating with people like us limits resources and connections. It may make one feel superior to others. It limits innovation and learning. To learn and grow, people need challenges to existing ideas, values and practices. Bonding networks tend to perpetuate the status quo. Bonding networks are neither good nor bad. It’s better to be in a network than not be in one. But bonding networks may sabotage or suppress new and different ideas. It may limit understanding of new ways to lead and manage a nonprofit. Bonding networks can create deep divisions in community and society. Bonding networks also may be of tremendous support to those in such networks.

Bonding Networks

Bonding networks, if effective, are intentionally built and maintained. They are not casual acquaintances. They require intentional connection and practicing the other relational features discussed in subsequence sections of this guideline. Personal bonding networks must be brought into the organization’s life in order for them to truly affect the nonprofit’s effectiveness and impact.Bridging networks connect people and organizations who think and act differently from “us”. They may have different worldviews, different purposes, different resources, different organizational structures and operations. Leaders must reach out and understand the differences in order to interact effectively. They must learn ways to deal with their ‘unease’. Often their existing beliefs and values are challenged. Nonprofit leaders may have to learn whole new meanings to the words they use. For example, for-profit executives and nonprofits may talk past each other during community visioning and planning sessions. Even on the simplest levels, one persons ‘objective’ is another person’s ‘goal’.

One person’s ‘vision’ and another person’s ‘key functions’. One person’s ‘governance’ is another person’s ‘control’. One person’s ‘networking’ to become acquainted and known, is another person’s ‘forming a legally binding agreement to work together using common missions, operations, services, and seeking the same outcomes’.1

Bridging Networks

Building bridging networks takes true collaboration and cooperation. It is harder to do. It requires more relational competence and willingness to share. Open communication must occur in respectful ways so that everyone knows what everyone else needs to get out of the collaboration in order for it to be of interest and use to them.

“Networking with integrity creates a greater willingness of all parties to be part of a human conduit to serve as energy and resource to one another. Sometimes you will give more than you receive and sometimes you will get back more than you give. It’s not about keeping score.” --Chris London2

Results. Nonprofits with strong bonding and bridging networks tend to have more resources, grow

1 For those who wish to have examples of effective functioning bridging networks, see the Interaction for Social Change examples and website at http://interactioninstitute.org/category/networks/ 2 As retrieved from AZQuotes.com


larger, perform better, and respect and tolerate differences more.3 One’s ability and willingness to trust others (those like us and those not) is higher.4 Democracy in organizations, states, and nations flourish when there are strong bonding and bridging networks.5 Organizations with strong networks understand the need and value of having both kinds of networks. Networking can produce many benefits. Networking helps create growth in the nonprofit. Networking leverages and uses more efficiently limited community resources. Without a healthy amount of social capital present, the entire economy has less value than it could have.6 Networking is a critical part of the actions required to build social capital. It affects budget size, as well as the nature and extent of other assets, including the presence of a quality work environment.

“Networking is an investment in your business. It takes time and when done correctly can yield great results for years to come.” --Diane Helbig7

Social Impact Investors’ and Nonprofit Scalers’ Discussion on Networked Organizations

In the growing literature on new ways in which the nonprofit sector can secure capital, the term network is used differently. They use the term as a kind of organization that is developed.8 Campbell, Virani, and Lanney define networks as “large direct-service organizations working under a single brand name with many branches or affiliates across the USA or world. They include a variety of multi-subsidiary legal structures, from one consolidated legal entity to federations and membership organizations made up of separate legal organizations.’9

3 Putnam, Robert D. (2000). Bowling alone: The collapse and revival of American community. New York: Simon & Schuster. And Putnam, Robert D., Feldstein, L. & Cohen, D. (2003). Better together: Restoring the American community. NY, NY: Simon & Schuster, are perhaps the best known among nonprofits for his work on social capital development and evaluation of the nonprofit sector in that regard, although there were several scholars before him making the same points.4 Putnam, Robert D. (2000). Bowling Alone: The collapse and revival of American community. New York: Simon & Schuster. Fukayama, Francis (1995). Trust: The social virtues and the creation of prosperity. Free Press.5 Fukayama, Francis (1995). Trust: The social virtues and the creation of prosperity. Free Press. & Sen, Amartya. (1999). Development as freedom. New York: Oxford University Press. 6 14 For example, Sen, Amartya (1999). Development as freedom. New York: Oxford University Press. Sen, Amartya (2010). The Idea of justice. London: Penguin. Nonprofits that grow hire more staff and use their assets in the communities in which they reside, as well as supporting for-profit vendors that nonprofit use.7 As retrieved from Wiseoldsayings.com8 For example, see Salamon, L. (2014). New frontiers in philanthropy. New York, N.Y.: Oxford University Press.9 Campbell,K., Virani, S. & Lanney,J. (2016). Network transformations: Can big nonprofits achieve big results? Stanford Social Innovation Review, March, as retrieved at https://www.bridgespan.org/insights/initiatives/transformative-scale/network-transformation-can-big-nonprofits-achieve And the University of Pennsylvania’s Wharton School article on Network revolution: Creating value through platforms, people and technology. PA, University of Pennsylvania, Wharton School, 14 Apr 2016 as retrieved from Knowledge@Wharton http://knowledge.wharton.upenn.edu/article/the-network-revolution-creating-value-through-platforms-people-and-digital-technology/ and Libert, B., Beck, M., Wind, J. (2016) The Network Imperative. Boston, MASS: Harvard Business Review Press. Also, some are referring to the phenomena surrounding networked organizations as the Fourth Industrial Revolution. See for example, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond


In 2016, 21 of the 36 largest nonprofits were networked nonprofits.10

There are several different nonprofit organizational models emerging in the nonprofit sector. Critical to any particular model found is careful consideration of a) where and how to grow; b) what kind of formal network to build, and c) what the role of the ‘center’ or headquarters will be.11 The considerations are dependent on what it is that will be taken to scale: principles, program packages, service delivery or treatment routines, etc. More complexity present in the thing(s) to be scaled usually leads to more standardization required among networked organizations.12

In the for-profit sector networked organizations also are the fastest growing type organizations.13 They deliver value through relationship which some call ‘network capital’. They create organizations participants use to interact or transact with many network members. “They sell products, build relationships, share advice, give reviews, collaborate and more.” These types of organizations are outperforming other types. They, on average, grow faster, generated higher profit margins, and used assets more efficiently. Their revenues were higher. Much of the same phenomena are occurring in the nonprofit sector.

“The companies that have truly built network-orchestrating organizations don’t just do one thing differently; they do everything differently — from leadership to recruiting to production to advertising.”–Knowledge@Wharton14

The formal relationship between the entities in such networks vary greatly. Governance and leadership functions vary in the degree each organization has management autonomy from the other. All such networks must determine which entity is going to be the lead and what that means. There are also plenty of examples of networked nonprofits that started with very little governance, leadership and management controls, and change to tighten authority and control relationships and vice versa. Relationships may grow legally and contractually more formal or less formal as times change, and partners interests and needs change.

10 As reported by Campbell, Virani, & Lanney. See footnote above.11 Bardach, J. (2003). Going to scale: The challenge of replicating social programs. Stanford Social Innovation Review. CA: LeLand Stanford University, Spring, 19-25. 12 For example, see Archer, N. P. (2004). Project management in network organizations. Paper presented at PMI® Research Conference: Innovations, London, England. Newtown Square, PA: Project Management Institute. As retrieved at https://www.pmi.org/learning/library/project-management-network-organizations-competitive-advantage-8309 13 Libert, B., Beck, M., & Wind, J. (2016) Network revolution: Creating value through platforms, people and technology. PA, University of Pennsylvania, Wharton School, 14 Apr as retrieved from Knowledge@Wharton http://knowledge.wharton.upenn.edu/article/the-network-revolution-creating-value-through-platforms-people-and-digital-technology/14 Libert, B., Beck, M., & Wind, J. (2016). Network revolution: Creating value through platforms, people and technology. PA, University of Pennsylvania, Wharton School, 14 Apr 2016 as retrieved from Knowledge@Wharton http://knowledge.wharton.upenn.edu/article/the-network-revolution-creating-value-through-platforms-people-and-digital-technology/


A more familiar type of networked nonprofit organization is an organization that keeps everything under its original 501c3 and expands by building branch offices and staff in several different geographic locations. Typically, urban areas are developed first. It has divisional staff, all under one organization led by one board and CEO under one brand name and mission. All employees are employees of the one organization. The Salvation Army and City Year are two examples. In this kind of networked model, everything is under the management authority of one board and multiple executives located in various geographic areas. Even within this model, governance in some organizations is less autonomous than in others.

Another form is the franchise model in which the founding organization scales by seeking other nonprofits that exist in targeted geographic locations that would like to be formally identified with the founding organization. The franchisee changes or adopts the franshisor’s brand name, if the entire business model is to be adopted, so that all are affiliated under the same brand name. In other examples, each organization keeps its name, but agrees to specified conditions for the use of some or all products and services, usually through license agreements. Often administration and operations resources are made available to all franchised organizations. In the nonprofit sector, there are many examples. Habitat for Humanity, Boys and Girls Club of America, and Youth Villages are examples of this type of model.

In the case of Youth Villages, there was a merger of two residential treatment facilities that serviced the same type of youth in the same city which started their move towards scale. A few years later, they started to expand partially by seeking formal relationships with other youth serving residential facilities in strategic locations across the state and, later, in other states. While separately incorporated with their own boards, the boards and staff agreed to use the same brand, services, share administrative and operational services, and each board and executive leadership had voice in what was done and how in the joint venture.

In a franchise15 type model, the declared headquarters usually provides some administrative services. Commonly, evaluation, public relations, and accounting functions are centralized. Fundraising often is decentralized but with support and help from headquarters development officers. Headquarters leadership bears responsibility to monitor and assess the effectiveness and productivity performance of its units so that the brand’s reputation is protected.

Some don’t seek out locations for the spread of their brand and services, but rather community

15 A franchise is the right or license granted by an organization to an individual or group to market its products or services in a specific territory. “One party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty, and gains (1) immediate name recognition, (2) tried and tested products, (3) standard building design and décor, (4) detailed techniques in running and promoting the business, (5) training of employees, and (6) ongoing help in promoting and upgrading of products. The franchiser gains rapid expansion of business and earnings at minimum capital outlay. As retrieved at http://www.businessdictionary.com/definition/franchising.html


groups seek them out. Normally this happens after the founding organization has gained public recognition for the outcomes and impacts of their services and/or programs. In the case of the Boys and Girls Clubs of America (BGCA), for example, local groups that want to start a BGCA program are required to incorporate as a 501c3 and bear the brand’s name. Formal agreements about the use of the name, logo, and endorsement stipulations are made. The local entity also agrees to accomplish the same mission and follow their program guidelines and principles. The roles and responsibilities of the locally incorporated group are carefully articulated. For example, all Boys and Girls Clubs must have a paid executive director and staff. Headquarters has a say in CEO selection and helps the local group find a CEO that has BGCA experience and training. The local board and executive staff administer and secure their own resources, market, recruit, and build strong relationships with community leaders and the public. In the beginning days, leaders from headquarters sought to build separate 501c3s in strategic locations across the USA. Later, interested community groups came to them.

Whether seeking out existing 501c3s or for-profits, or building new 501cs, the founding organization usually assesses the prospective network partner’s financial, operations, leadership and administrative know-how, existing outcomes and impacts, as well as their current community reputation.

In most franchise type networks, each entity must incorporate, have its own board of directors, hire its own staff. Headquarters monitors compliance, conducts evaluations and research, provides leadership development for boards and staff, and provides program materials for use by local units. Some varying degrees of governance, leadership and administrative autonomy are given each entity so that staff and board can maintain their fiduciary responsibilities and build strong local relationships and services. Each nonprofit’s leaders’ authority is gained by practicing respect and ensuring that the policies each must adhere to are fair, consistent, and purposeful.

Obviously, the larger the operation becomes the more standardized some operations become which adds efficiency, but also creates organizational crises from time to time as customers and communities change, but the organizational operations and structures don’t. Effective networked nonprofits constantly monitor operations and program quality to ensure outcomes and impacts are positive.16 They are adaptive and change governance, operation, and service structures and processes when needed.

16 See NANOE’s Growth Series Booklet entitled Growth by evaluating services, operations and impacts for details and many resources on this topic.


Another model is a licensing17 model. Something that the founding nonprofit has is licensed to other nonprofits to use. Other nonprofits don’t change their names but do refer to the service or program package using the trademark or registered name given by the founding nonprofit. Their leadership, administration, governance and services remain untouched. But whatever is licensed may be monitored for fidelity and usually the licensed nonprofit has limitations to its use of the trademark or registered name of the thing licensed. The founding organization usually provides orientations and training to those that want it. Some require training and others don’t. Licensing agreements stipulate what can be used and replicated, and what can’t be done without seeking approval of the founding organization. Typically, the founding organization seeks to provide ways to keep their networked partners informed, convened, and monitored. In this case, governance of one entity is affected very little by the founding nonprofit, other than as it applies to the conditions under which the trademarked or registered name and products are used and not used.

Another model for going to scale is where only principles are propagated but not a brand name or any trademark or registered products. The Harlem Children Zones is an example of an organization that has grown to accomplish its mission but chose to replicate its ideas, service and relational principles without having to manage multiple locations and organizations in distant communities and that were not a part of their original intent to serve specific blocks within Harlem.18 It stayed true to its mission. It clearly says on its website that it does not license or endorse programs patterned after their programs in other communities, nor does it bear oversight and responsibility for the quality of efforts done by others. It also does not now envision using a franchise model to replicate their registered programs or names.

HCZ’s success gained national attention during the Obama Administration through the President’s Promise Neighborhoods initiative, which was a transformation of the Bush administration’s Compassion Initiative. HCZ partnered with PolicyLink and the Center for the Study of Social Policy through which they taught other communities interested in following HCZ’s principles and approach. The Harlem Children Zone didn’t just emerge as a success immediately. Its roots started in 1970 and under a different incorporated name. By seizing opportunity, it became very successful in providing a truancy prevention program to youth that worked well. As they developed in-depth relationships with their youth and parents, they realized a much more comprehensive support system was needed and sought to provide it. Along the way they developed several trademarked and registered services

17 A license is a “revocable written or implied agreement by an authority or proprietor (the licensor) not to assert his or her right for a specific period and under specified conditions to prevent another party (the licensor) from engaging in certain activity that is normally forbidden (such as using copyrighted materials, trademarked names, registered processes associated under another entities brand name). Intellectual property licenses generally ensure that the licensor will not invoke ownership protection laws, if the licensed property is copied, sold, or used by the licensee. A license is not a right, because the licensor may not have the legal power to give all necessary permissions that constitute a legal right. It is also not a lease and not assignable by the licensee” As retrieved at http://www.businessdictionary.com/definition/license.html 18 See Harlem Children Zones at http://hcz.org/


(i.e. the Baby College, Harlem Gems, Promise Academy, Healthy Harlem, etc.). Word of their success spread and other organizations started coming to them to learn to do the same things and asked for permission to use their programs, materials and services. They established the Practitioners Institute in 2003 to meet this demand.19 Their core belief is that what they wanted to spread was their core principles and not their specific programs because of the uniqueness of each community and its context.

When the leadership started on a ten-year strategic growth plan to expand its reach to more and more blocks within Harlem, growth started happening. They declared the core principles for their work and organization. These principles are one way to express some of the key practices advocated in this guideline. HCZ’s five core principles are:

“What has enabled us to achieve such unprecedented success is our steadfast application of five core principles:

• Serve an entire neighborhood comprehensively and at scale to create a tipping point and definitively shift the culture of the community

• Create a pipeline of coordinated, best-practice programs to give our children and families seamless support from birth through college and maximize their outcomes

• Build community among residents, institutions, and stakeholders in order to create a healthy, positive environment where our children can thrive

• Evaluate program outcomes and create a feedback loop to provide managers with real-time data and strengthen services

• Cultivate an organizational culture of success rooted in passion, accountability, leadership, and teamwork”20

Harlem Children Zones started their growth plan to go from 24 blocks in 1997, then 60 and ultimately reached 100 blocks by 2007. They currently serve more than 12,509 youth and another 12,498 adults within Harlem. In addition, they gained national attention during the Obama Administration and were one of the nonprofits featured for expansion. In support of the Obama Promising Neighborhood initiative they went through three rounds of work with 22 different communities across the USA to begin similar efforts in their locations under the tutelage of HCZ, working with PolicyLink and the Center for the Study of Social Policy. They also caught the attention of the Edna McConnell Clark Foundation’s capital aggregation program. Since 1979, EMCF has invested $86.6 million in HCZ! HCZ has a $200 million growth capital campaign which it is in the process of executing (2014-2017). TTheir capital growth strategic plan is worth reading as a model.

19 See The Practitioners’ Institute at http://hcz.org/spreading-the-model/ 20 See Harlem Children Zones core principles at http://hcz.org/about-us/history/


Growth can occur in a number of different types of networks with different legal arrangements, differing degrees of governance, leadership and administrative autonomy. There are many fine models to follow, depending on what it is you want to scale.

Merging, franchising, and licensing models are all used by various nonprofit networks that have grown very large. Some build better social environments than others. For example, World Vision is known for its ability to create quality, respected formal networks with other entities for common purposes under the same brand name. They are also known to be very cross-cultural and democratic in their dealings with networked partners. The social relationships and resulting business practices have been considered exemplar for many years. World Vision has been allowed to stay in some countries way longer than any other international nonprofits during times when there is a crackdown on international nonprofits.

When existing nonprofits decide to adopt the brand of another nonprofit, there are new challenges in governance and leadership. Various degrees of management autonomy are present in various networked models. In all cases, supervisory and governance authority tends to be democratic, cooperative and shared. There is a distinct recognition that multiple stakeholders are present and will largely determine whether the networked organizations grow or die. Much of the lessons learned on how to take your nonprofit to scale deal with the lessons learned in trying to lead networked organizations with numerous boards of directors and executives (plus staff, volunteers, clients, donors, funders). Certainly, one major path to growth is to network organizations formally, but it requires strong leaders who are willing to respect and work with each other. These types of networks are what many leaders believe are the only way in which major social, cultural and environmental issues will be solved (not just ‘helped’ or ‘serviced’).

A recent interview study examined some of the largest networked nonprofits in the USA found that these networked organization had some common characteristics:

First, courageous leaders and critical data served as catalysts for change. Second, these organizations reviewed their historic assets and worked to make them relevant today. Third, they chose a path to change that made the most of their networks. And along the way, they debunked some myths about organizational transformation to adopt strategies rooted in solving, not just serving, the problems faced by their beneficiaries.21

21 Campbell,K., Virani, S. & Lanney,J. (2016). Network transformations: Can big nonprofits achieve big results? Stanford Social Innovation Review, March, as retrieved at https://www.bridgespan.org/insights/initiatives/transformative-scale/network-transformation-can-big-nonprofits-achieve


Types of Agreements Made By Networked Organizations

There are many ways that nonprofits structure working relationships with other nonprofits. In addition to changes in incorporation, networked organizations use a variety of agreement instruments.22 Some don’t have legal standing, but most of them do. Among the most typical agreements made are MOUs, contracts, service agreements, mutual service agreements, license agreements, resource-sharing agreements, fiscally sponsored collaborative agreements, partnership agreements, joint venture agreements, and mergers.

A MOU (Memorandum of Understanding) isn’t usually enforceable but specifies understandings and depending on the words used in the MOU, it can be legally binding. Most prefer to call such agreements contracts which are enforceable agreements. In a contract, each party’s obligations and promises to the other are identified. The work to be done by both and often the outcomes and performance benchmarks are detailed. Budgets include who is paying for and receiving what and when. The length of time the agreement is in effect, and how and under what conditions the MOU or contract can be terminated earlier also are articulated.

Another instrument used is a service agreement. One organization provides services to another organization for money or some other consideration. For example, charter schools may enter into a service agreement with a curriculum company or one nonprofit may agree with another to use their facilities. Service agreements usually benefit both partners and help further their respective missions.

Yet another type of agreement between nonprofits is a mutual service agreement in which a more complicated, involved form of collaboration is present. Each party commits to providing services without a monetary transfer from one to the other.

A license agreement gives one organization the right to use something that another organization has, such as a specific registered or trademarked program package. License agreements deal with intellectual property rights and articulate the ways in which such things as registered or trademarked names, logos, copyrights, patents, mailing lists, private formulas or codes may be used. Nonprofits can license its name and logo in support of certain specified events and not when others occur. Rights of the employees to endorse other organization’s efforts using the brand name is limited. United Ways, for example, use licensing agreements to specify under what conditions their logo and name can be used and what can and can’t be endorsed.

22 We are grateful to the NEO Law Firm for their identification of the number of ways that nonprofits form collaborative networks with other nonprofits and for-profits. See http://www.nonprofitlawblog.com/nonprofit-collaborations-structural-options/


Another type of agreement is a resource-sharing agreement which specifies what things (office space, equipment) or people (bookkeepers, evaluators, IT technicians) will be shared between or among the organizations entering into such an agreement. These agreements carefully identify how costs of the shared services are distributed to each party. Costs must be shown to be below or at fair market value, particularly when entering into such an agreement with for-profits. These are harder agreements to formulate because if something goes wrong, other issues arise with leases, licenses, workmen compensation, liability insurance, etc. A lawyer is usually consulted to make sure appropriate protections are in place for all parties involved.

Sometimes a third-party fiscal sponsor is used for fiscally-sponsored collaborative agreements. Each organization can work with the other without as much concern about control and liability issues. The third party owns and ultimately is responsible for the project. Normally, a steering committee is established comprised of leaders from all parties involved. Funders that pool money and other resources such as program or evaluation personnel, and jointly issue an RFP to prospective grantees is one example. Some United Ways, in some cases, act as third party fiscal sponsors to collaboratives involving incorporated nonprofits and unincorporated neighborhood groups, or nonprofit and for-profit collaboratives. Such arrangements may mediate management control issues and ensure proper management of funds allocated for projects which the collaborative wants to do.

A partnership agreement, on the other hand, is where two or more organizations own rights and bear jointly and severally liabilities present or created through the partnership. An LLC (limited liability for-profit company), or a L3C (low-profit limited liability for-profit company) may be owned by two or more parties but structured so that liabilities of the LLC or L3C would not normally be the owners. Two new forms of social enterprise, beside the L3C mentioned above, are the benefit corporation and social purpose corporation. They are for-profit enterprises with social purposes in addition to a profit-making purpose. They have owners. Partnership agreements would protect and limit their risk of liability for what is done by the those involved in the partnership. Some nonprofits create one or more L3C or benefit corporations related to their mission.

If the partnership is between nonprofits, which have no owners, the partnership is usually governed by a board appointed by the two or more parties engaged in the partnership. Certain board rights and responsibilities are identified by each partner entering into the partnership agreement, such as voting rights. Many times, one will see that the CEO of each organization is a voting member of the partnership board, along with other board members from each organization. Many times, what is created is another organization (non-profit or for-profit).

Whether the partners are from for-profits and own some portion or all of their for-profit assets and liabilities, or are from nonprofits where they don’t own the nonprofit’s property and assets but bear fiduciary responsibilities to ensure the non-profit engages in activities related to mission and have the best interests of the nonprofit corporation in mind, each partner needs to be assured of its obligations and liabilities. Legal counsel is usually sought to forge carefully the partnership agreement.


More and more joint venture agreements are being made between nonprofits and for-profit entities, particularly to raise capital, access expertise available in a for-profit enterprise, and to seize opportunities. For example, a nonprofit may have intellectual property rights linked with valued produces or services, or special tax credits may be available to nonprofits (such as the low-income Housing Tax Credit), or the nonprofit has good community and political endorsement and support. Or the nonprofit may have a very large customer pool that offers great opportunity to the for-profit. Whatever the motivations for joining a joint venture, it is usually when both benefit greatly from the agreement and do no harm to customers, nor are taken advantage of in unethical ways that these agreements are successful. The partners involved in the joint venture must determine which entity will take the lead role. In such joint ventures, the lead and partnering nonprofits must make sure the joint venture does not jeopardize each’s incorporated status and is in keeping with each nonprofit’s mission. Accountability and management control issues are discussed and understood, including what activities the nonprofit must retain management control of in the joint venture, the rights each has in decision making considerations, who is the lead and what the performance criteria will be. Typical equal numbers of seats on the board of the corporate joint venture is required in the agreement so that the board looks out not only for the interests of the joint venture, but also the interests of the corporations they represent (nonprofit and for-profit).

Sometimes, as organizations work together, it becomes clear that it is in everyone’s interest to merge. In this case, typically one organization’s brand name and incorporation remains, while the other organization goes through formal dissolution procedures required by the state in which they were incorporated. The corporation that continues inherits during the dissolution procedure the assets of the corporation that is going out of business. They also, however, inherit all liabilities and obligations so a clear picture of what is being inherited is needed before the process begins.

Intense discussion usually occurs about governance transitions. Will board members, all or some, of the nonprofits changing to a common brand name become a part of the other organization’s board? What programs will disappear or be transferred? How will employees, volunteers, donors, funders, contractors, insurers be notified and treated during the transition?

If not handled properly, unanticipated consequences of mergers or changes in brand name and operations can result in taxes placed on real property transfers, breaches of contracts that the nonprofit had that was re-purposing itself, and loss of future planned gifts and donations. Existing endowments, and restricted gifts that are assets of the company going out of business or transitioning must be examined for how they are handled during the merger or re-purposing process. The costs involved to legally and successfully complete a merger can be substantial so expectations of costs savings by mergers need to bear that in mind. The benefits, if done successfully, can increase efficiency and effectiveness in advancing mission at a greater scale in geography, clients, programs, staff and operational capacity.

Using reasonable considerations, partners verify that each is trustworthy and capable of pursuing common goals. Partners verify to a reasonable extent whether each can be expected to meet all their obligations. Each organization’s leadership (CEO and board) must reasonably protect its exposure to


loss of assets and revenues should a partner not meet their obligations. These conditions are usually detailed in many of the agreements.

Building networked relationships is not easy and must be done carefully. However, the rewards are great and networked relationships is an earmark of many nonprofits that have gone to scale. The more complex the networked relationship, the greater the competence required of leadership.


KEY PRACTICE NO. 2BUILD EQUAL & EQUITABLE

RELATIONSHIPS


KEY PRACTICE NO. 2BUILD RELATIONSHIPS BASED ON EQUALITY & EQUITY

Recent events changed the meaning of these words. Today, definitions of equality and equity are very diverse, contradictory, and misleading. Definitions of equality have changed in recent times. However, both concepts are very important in understanding high performing leaders’ attitudes and behaviors.

Previously, nonprofit authors encouraged human service professionals to think about the people they served and worked with as their equals and to work to ensure each was treated fairly and justly. But with time, the definition of equality and equity changed and authors started talking about equality as a ‘flawed concept’, ‘unworkable’, ‘discriminatory’, etc. So, what happened? Why did equality fall out of favor and get re-defined among so many nonprofit leaders?

A drawing familiar to most is shown in Figure 1. It originated as a drawing and metaphor for the difference in resource distribution in two major political philosophies which Craig Froehle labeled Equality “to a conservative” and “to a liberal”. It’s a powerful image, caught on and was shared by millions over the internet and in publications.23 Nonprofit sector leaders re-purposed the image to talk about the differences between ‘equality’ and ‘equity’. (For example, see Figure 2.) As time went on, more and more believed that both equality and equity addressed differing beliefs about the basis on which resource allocations were made. The two terms and concepts were put at odds with one another, rather than helping people understand the differences in meaning. Currently, the common view of equality is that it is a flawed idea. Its original definition has been lost to many human services leaders.

Unfortunately, the flawed understandings are used to educate others, including our children! While a powerful image, Froehle’s drawing and many modified versions of it leads readers astray when thinking about equality and equity. Figures 3 and 4 are perhaps more accurate visual distinctions. Many years ago, in the family support field, a set of new guidelines to practice were created by engaging staff and leaders from family support centers in every state.24 They started their guidelines with a set of core values that guided practice. One of these values was that family support providers and leaders were to see their clients as their equals. What was involved in practicing equality was thoroughly discussed in the 1990-2000 period. A service provider was challenged to believe that each person had the same sacred and undeniable moral status as they did. For an overly professionalized field, where professional service providers tended to think they knew what was best

23 See Craig Froehle’s discussion on how surprised he was at how fast his image spread across the internet and some of the morphs found at https://medium.com/@CRA1G/the-evolution-of-an-accidental-meme-ddc4e139e0e4 24 The guidelines for practice were issued by the Family Resource Coalition, later called Family Support America. FSA, its original mission and programs, no longer exists. Today, The FRIENDS network has pick up some of what the original FSA use to do. See https://www.friendsnrc.org/ .




for their clients and that clients really didn’t know, it restored more voice for customers and providers treated clients more fairly and justly and engaged them more in the decision-making processes that affected their lives. It changed the way many family support professionals related to their clients, service delivery processes, and even the kinds of services provided. Starting around 2000, a shift in definition and terminology occurred. There was and still is discussion about the harm in thinking about people as equals.25 The concept of equality was typically discussed as if equality was only about a philosophy of resource distribution that called for the same resources to be available to all, despite their differences and contexts.26 Often the Figure 2 graphic was referenced or used to illustrate their point.

At the same time, as human service professionals debated equality and equity, and redefined these concepts, new laws were enacted which were based on the principle that each person, regardless of their differences, has equal moral status and thus should result in equitable treatment that is fair and just. The laws expanded what were considered unalienable rights because of our equal moral status so that more were treated justly and fairly, despite their differences.

Discrimination, for example, is an act of separation, of believing one’s status is better than another, or that one condition is superior to another, or wrong or right in some way. Discrimination is an act of denying access to opportunities and resources. It is based on people’s beliefs about another individual and/or group which have attributed undesirable characteristics. Discrimination based on a person’s income level, gender identity, sex, race, disabilities, ethnicity, among other things, was and is declared illegal. The basis in law goes back to the right of equal protection under the law because of the declaration that ‘all men (mankind) were created equal”. It is a recognition of equal moral status (equality). It is also people trying to protect and guarantee fair and just treatment of others (equity) in light of their equal moral status.

Today, nonprofits are required by law to practice equity and provide a work environment where people are afforded the same moral status. Nonprofits that receive state and federal funds are to avoid discrimination and deal swiftly with those that do discriminate. All people’s moral claims (equality) are to be heard in a fair, just manner (equity). Various laws affected hiring practices, grievance procedures, and selection processes for customers, if there were more customers than services available. It ensured some individuals, such as those about to have a baby or being deployed, had the right to leave without fear of losing their job (an equity issue). In a recent thoughtful blog entitled “Why equality is harmful to equity”27 the author notes that “Equality is often an insidious force, a weed disguised as a flower that prevents the seeds of Equity from germinating.” She goes one to talk about how nonprofits contend everywhere with people

25 For example, see Nonprofit=Absolutely Fund’s blog Why Equality is Absolutely Harmful to Equity at http://nonprofitaf.com/2015/11/why-equality-is-actively-harmful-to-equity/ as retrieved on 7/9/1726 For example, see Cultural organizing the problem with the equality-equity graphic at http://culturalorganizing.org/the-problem-with-that-equity-vs-equality-graphic/ 27 See Nonprofit=Absolutely Fun, Why Equality is Absolutely Harmful to Equity, at http://nonprofitaf.com/2015/11/why-equality-is-actively-harmful-to-equity/ as retrieved on 7/9/17


trying to practice equality (which she implicitly equates with sameness of resource allocations, and sameness in practices used in workplaces). She notes that recently nonprofit sector leaders, organizations and individuals are moving to discussions of equity, but that the social, political, and legal systems are still set up to uphold the value of equality.

She cites that practicing equality rather than equity (as if it needed to be one or the other) is harmful in practice because it discriminates against certain kinds of people (minorities, immigrants, people not skilled at certain things, such as interviewing, or writing a resume, etc.). The author thinks current systems of hiring harm minorities when they are set up to ensure that all applicants are reviewed in the same way because minorities don’t always have the same access to resources to get help on resume writing, etc. Grant application processes managed to ensure equality favor those that can afford or have on staff good grant writers. She also sees treating people equally as detrimental to those nonprofits created to service particular racial or ethnic groups. Reportedly, there is constant pressure on such groups to reach out to everyone, not just one race, ethnicity or immigrant group. However, she has confused the concept of equality with equity. She makes some good points but confuses meanings.

In her definition of equality (which is actually equity), when one doesn’t see differences and deal with people accordingly, injustice occurs. For example, “when we don’t see color, we also don’t see institutionalized racism and oppression, and the role we may be playing in perpetuating it.” We are ‘colorblind’ which disadvantages people of color. And when we fall into the ‘equality trap’, we have an excuse to overlook racial injustices around us. However, she is actually talking about the challenges of practicing equity rather than people being of the same moral status (equality)!

For this author, equality appears to be the easier concept to understand, is less messy and risky. (Here she is talking about using ‘sameness’ in treatment, however.) To her, grasping what equality means in practices takes less effort. Equity, on the other hand, takes “more time, energy, and thoughtfulness”. “It requires us to reexamine everything we know and change systems and practices that we have been using for hundreds of years. This is often painful and uncomfortable.”

However, practicing equally and equity isn’t an either-or treatment situation. It does require everyone examine what their operative definitions of these terms28 are and to recognized that both must be practiced and both are challenging to put into practice. It also means we must constantly review our organization’s policies, procedures, and human interactions to make sure that we respect our sameness and also treat people fairly and justly.

28 For those who want a deep dive into philosophical thought on equality and equity see https://plato.stanford.edu/entries/equality/


EQUALITYDefinition of Equality. Equality refers to our moral status in relationship to each other. When practicing equality, one thinks of others as being just as worthy as they are. Because basic moral status is the same, we are motivated to collective action to ensure worth and dignity are preserved. It is sameness of status, not sameness of treatment as so many misrepresentations suggest. The basis for judging a person’s worth is not on what they can do, what they have, what they look like, or where they come from. It is not even about treating each other in the same way as we understand it from how it’s been defined by the visual images found in Figure 2.

We all know, or most of us anyway, that everything we do to others and think about others is not always just or fair! Practicing equality and equity is a lifetime growth process, even if we consciously work at it.

Who determines equality? Humans do like to promote self-interests, assume control, and create divisions based on such things as position, wealth, rank, class, race, and expertise. We discriminate daily based on perceived differences and self-interests. While many wish people would be motivated by respect of each other’s sacred, moral status, we all struggle or willingly pursue self-interests. We have both a selfless and selfish side! Some boast of their worth and position of authority more than others!

Who decides whether we are equal in moral status? The answer will vary depending on your belief system. The “You will (law-based)”, “I believe (personal integration into core values)”, and “They say I must (authority figures say)” belief systems operate in various individuals affiliated with your organization, depending on how they have defined and prioritized certain values and beliefs. Their values and beliefs guide their behavior and attitudes towards others like them and not like them. In your current view, who is given the right to determine equality? How does that understanding affect your actions with and attributions about others like you and not like you?

Each religion’s sacred writings discuss equality. In Christianity, equality refers to one’s relationship to the Creator or to God, depending on the passage. The Greek word for equality is isotes in the New Testament. However, there are many passages in the Old Testament that address equality and equity principles.29 With regard to isotes, it is translated in some passages as a state of being (we are all seen as morally equal) and in other places as a behavior (treat each other fairly or justly). It is usually used in a call people to collective action towards others who are different from the group addressed. The reason for acknowledging one’s moral status is equal to another’s moral status is that we were created by God and made in His image. 30 God determined our worth and declared all equally worthy. To deny our own and other’s worth is to deny God created all of us in His image and that

29 For example, see the listing at http://www.biblestudytools.com/topical-verses/bible-verses-about-equality/ but there are many other sites available for review.30 One thoughtful piece to contemplate is Padgett, A. (2002). What is Biblical equality? A simple definition needs further discussion, not least because of misunderstanding. Priscilla Papers, Summer. As retrieved at https://www.cbeinternational.org/resources/article/priscilla-papers/what-biblical-equality


He determines our worth, not you. He made us worthy and valuable to Him and asks us to live our collective lives in light of our equal moral status.31

For those who do not have an acknowledged spiritual life or believe God exists, the rationale may be based on other respected sources such as the Declaration of Independence which declares that “all men (mankind) are created equal”, or we may see others as our equal because our parents taught us that all are equally worthy, have the same dignity, or we may believe the principles found in law which upholds certain rights claims because we are created by the Creator with certain unalienable rights.

As a moral code applied to your nonprofit, people are to respect the sacredness of each person affiliated with your nonprofit. We are called to exercise authority, control, leadership, management, operations and services in ways that affirm people’s Creator-given worth and status, and acknowledge that no person affiliated with the organization, irrespective of position and guarantee of authority, has a right to view people other than as their equal in this very fundamental sense.

Practicing equality is tough. It requires, in some instances, transformation of long-held beliefs and attitudes. And even when one actually believes that all people are equal in moral status, it still has to actually affect behavior! When we begin to actualize a belief that we are all equal in moral status, it changes many things about how we lead and work with each other in our nonprofits. For example, it changes what we think about individual moral and ethical claims in the workplace. It changes how we think about and conduct performance evaluations. It changes what we think appropriate leadership and management authority and control practices are. It changes what people in authority positions think about and relate to those “under” their supervision. It changes what board members think is appropriate interactions with the CEO. It changes what government funders (agents) think about appropriate interactions with nonprofit leaders. It changes how nonprofit sector leaders talk about each other, their employees and other nonprofits and organizations. So many things change when we fully embrace an understanding that all people have the same moral status as we do.

What is it that is equalized in nonprofits? Why?

Simply put, change your beliefs and attitudes about other’s worth and status relative to yours! Recognize all have the same moral status. There are many things in work environments that cause divisions, rivalries, and separations. Some workplace environments promote divisions and discriminate. Is it fashionable to degrade others, while building yourself or your friends up? Are a few noticed, and most go unnoticed and unrewarded? Do some units or departments never get

31 One the most masterful, insightful discussions on this was by Dallas Willard. It’s a classic. Willard, D. (1998). The divine conspiracy: Re-discovering our hidden life in God. San Francisco, CA: Harper Publishing Company; Also see http://dwillard.org/default.asp for additional books, articles, etc. he wrote. He dives deep into the relational features discussed in this guideline.


to meet other units but talk about each other a lot? Do leaders forbid some people from talking to others? Does one person make all the decisions on the use of resources and not involve others? Does the board and executives involve the staff affected by the decisions that must be made? What is the basis upon which division and exclusion exist in your workplace? Is it because some just don’t think of others as their equals—i.e. having the same sacred moral status as they have?

In recent discussions about the board and its dysfunction, some advocate continuing to promote the same relationships between board and staff that basically have been untouched in over a century, particularly the board-CEO relationship. Others flatly say traditional views of administration and governance simply don’t work so why should industry leaders continue to promote dysfunction, often laying the blame on the CEO or “deadbeat” board members. “If only they tried harder”! The issue isn’t so much whether boards should exist but in each recognizing they (board and CEO) have the same moral status as the other and treating each other fairly and justly. It’s about articulating the core values related to equality and equity that guide interactions between board and CEO, CEO and other leaders, and supervisors with other staff members, paid staff with volunteers, donors with CEOs and boards. Our task is to create socially just, fair nonprofit work environments (equity), including those at the board-CEO relational level.32 Just because one is a board member or a CEO doesn’t give them license to think they are superior to others affiliated with the organization! No one in the nonprofit sector has the right to deny the moral status of others (equality). If practiced in your organization, what changes?

Elizabeth Anderson defines a community of equals as follows: “It is a community in which people treat other with concern and respect (equal moral status), and accept the obligation to act (equity) in ways that are justifiable to others.33 The practice of equality at this fundamental level is considered by many to be required for a democracy to exist, including the democracy found in the nonprofit sector!

Does practicing equality mean we don’t assign people to different positions of leadership and management? No. But remembering we are all have the same moral status and that sameness is there, regardless of how we feel or what we attribute to a person, means leadership and management authority are exercised more impartially, fairly, uniformly, and with tolerance, kindness, respect, and consideration of differences. It’s not so much about exercising control, but about giving freedom! We may not agree with others, but the response of one practicing equality isn’t to denigrate the person, or in some way attack them, or put them down. While these are fashionable behaviors currently in our society, they are not examples of valuing or understanding equality in actual behavior. In the differences among people, there is sameness in our humanity!

32 See Ford Foundation, Asset and Community Development Staff. (2004). Assets for social change: Pathways to large-scale impact. New York, N.Y.: Ford Foundation. Available as a pdf on the internet at https://www.fordfoundation.org/library/reports-and-studies/asset-building-for-social-change-pathways-to-large-scale-impact/ 33 Anderson, E. (1999). What’s the point of equality? Ethics, Vol 109, p. 313.


EQUITYA definition of equity. Equity in action involves a person believing everyone they deal with has the same moral status (i.e. are equal) but that people are very different and their circumstances are very different, and that to truly solve today’s social problems, we must deal fairly and justly with people in light of the differences present. We must create institutions that are fair and just. We must work to alleviate barriers to access and opportunity some have. It’s not about thinking everyone has to get the same things (i.e. a resource allocation and distribution philosophy), but rather about everyone getting what is needed to improve or correct their situation. It involves individual and social justice for people and groups. Correction often involves societal re-structuring, including what nonprofits do and don’t do, and what they may be required to do as laws correct injustice.

Equity is very much a collective action concept. While we can practice equity in our daily interactions with others, social and environmental problems often result because of inequities and unjust actions of people within organized groups, institutions and agencies. The nonprofit sector is not exempt from potentially being unequitable in its actions.

As the Americans for the Arts say, ‘substantive learning’ must occur in the organization regarding equality and equity. Unless people are on the same page in their understandings, it will be hard to expect consistency in practice. What we believe affects what we intend to do.34 Create a corporate equality and equity culture. What we intend to do may or may not affect one’s actions. So, it takes individual and collective will to practice treating people equitably and seeing each as their equals in moral status. It takes constant re-examination of procedures, policies and practices to make sure they are fair and just.

An example. One example of an organization that overtly discussed what they meant by equity is the Americans for the Arts. They have created a very comprehensive definition and set of corporate action principles worth your review. They involved a broad array of stakeholders in the formulation of their ‘Statement on Cultural Equity’.35 Below is the Americans for the Arts definitions:

The following definitions of diversity, inclusion, and equity are drawn from Carmen Morgan of ArtEquity, a leader at the intersection of diversity, equity, inclusion and the arts.

Diversity is often referred to as the extent which an organization has people from diverse backgrounds represented throughout. It is recognition of individual differences. These differences can be along the dimensions of race, ethnicity, age, gender, gender identity, gender expression, sexual

34 Ajzen, I. (2011). Behavioral interventions: Design and evaluation guided by the theory of planned behavior. In M. M. Mark, S. I. Donaldson, & B. C. Campbell (Eds.), Social psychology for program and policy evaluation (pp. 74-100). New York: Guilford. Aizen, I. (2006). The TPB model. Retreived from http://www.people.umass.edu/Aizen/pdf /tpb.intervention.pdf Ajzen, I. (2005). Attitudes, personality, and behavior (2nd Edition). Milton-Keynes, England: Open University Press / McGraw- Hill.35 See The Americans for the Arts’ State on Cultural Equity at http://www.americansforthearts.org/about-americans-for-the-arts/statement-on-cultural-equity


orientation, physical abilities, nationality, language, religious beliefs, and socioeconomic background and other areas of identity.

Inclusion on the other hand is seen as the active, intentional, and ongoing engagement of the diversity of an organization, organizational culture, production of art on stage (essentially all of the ways that an individual might connect and interact with the organization, systems, and community) in order to create equal access, well-being, and a sense of belonging for all members of the organization. Inclusion is closely tied to the culture of an organization.

Equity, in contrast, are the systems, protocols, practices, and policies that allow everyone to be treated fairly within an organization. Equity is closely tied to actions and results.The following definition of cultural equity was adapted from a few different sources, most notably from work by Arlene Goldbard.

Cultural equity embodies the values, policies, and practices that ensure that all people—including but not limited to those who have been historically underrepresented based on race/ethnicity, age, ability, sexual orientation, gender, socioeconomic status, geography, citizenship status, or religion—are represented in the development of arts policy; the support of artists; the nurturing of accessible, thriving venues for expression; and the fair distribution of programmatic, financial, and informational resources.

Their definition includes giving all affiliated with their organization representation, support, nurturance, accessibility, voice, and fair distribution of resources. In their extended statement, they clearly state their values, principles and actions they intend to promote to ensure cultural equity. It is certainly a nice model to examine, if your organization wants to raise the level of awareness and practice of equity in and through your organization. Here is what is said in summary about the workplace actions and larger societal action Americans for the Arts plans to take in light of their equity code36:

Modeling Through ActionTo provide informed, authentic leadership for cultural equity, we strive to…

Pursue cultural consciousness throughout our organization through substantive learning and formal, transparent policies.

Acknowledge and dismantle any inequities within our policies, systems, programs, and services, and report organization progress.

Commit time and resources to expand more diverse leadership within our board, staff, and advisory bodies.

36 As retrieved on 7/13/2017 at http://www.americansforthearts.org/about-americans-for-the-arts/statement-on-cultural-equity


Fueling the FieldTo pursue needed systemic change related to equity, we strive to…

Encourage substantive learning to build cultural consciousness and to proliferate pro-equity policies and practices by all of our constituencies and audiences.

Improve the cultural leadership pipeline by creating and supporting programs and policies that foster leadership that reflects the full breadth of American society.

Generate and aggregate quantitative and qualitative research related to equity to make incremental, measurable progress towards cultural equity more visible.

Advocate for public and private-sector policy that promotes cultural equity.

In Figure 2, the definition of equity was ‘fairness’. But the concept is much more than just ensuring fairness in allocation of resources. In addition, those in the social impact investment field would say the outcomes of equity is not improving their situation, but rather solving the issues, structural and societal inequities present!

Equity is a behavior (treat others fairly and justly, include all others, give others access) and an outcome (a fair and just workplace, education system, health care system, policy system, etc). Differences are examined. The nature and source of those differences are understood. The effects of barriers and differences on people and groups are identified. Practically, institutional changes are made so that agencies allocating and distributing resources and providing opportunities do so in a way that is fair and just to all. People denied opportunities and resources because of their differences are provided these things in proportion to what is needed to create a fair, just situation relative to others. Distribution of resources is not done based on the principle of sameness (i.e. allocating resources in the same way to people with different conditions), but in proportion to need and in light of differences.

“The challenge of leadership is to be strong, but not rude; be kind, but not weak; be bold, but not bully; be thoughtful, but not lazy; be humble, but not timid; be proud, but not arrogant; have humor, but without folly.” --Jim Rohn37

Throughout the nonprofit sector’s history, wealth, position, gender, occupation, and ancestral heritage were used as the basis to discriminate and create unjust, unfair nonprofit working conditions. Women CEOs are paid differently in many nonprofits than men. Larger nonprofits have more male CEOs than smaller ones. Some nonprofits pay their executives a competitive wage while paying staff, some who are just as qualified, a very low wage. Some nonprofit CEOs are denied voice in board meetings even though they are the ones asked to carry out whatever decision was

37 As retrieved from BrainyQuotes.com


made. Some boards are still chosen because of their wealth and status, not talents and passions for cause. These are just a few of the inequities that are still fairly widespread in the nonprofit sector.As planners have long recognized, the people who need to be treated equitably are the hardest to get to the table for discussion. Long histories of distrust, discrimination, injustice make people expect the same from you! Trust must be earned with clients, volunteers, staff, CEOs, board members who have not been treated fairly or justly. Asking them to come to meetings at the leader’s convenience, usually doesn’t work. Promising things that you’re not sure you can deliver, builds mistrust. Denying leaders or customers access to important operational, strategic planning, and resource allocation discussions creates mistrust, disrespect, and less productivity and involvement. Distributing a lot of resources to programs and services at the expense of building capacity in other areas of the nonprofit creates an unfair workplace, and usually leads to loss of income and growth and people leaving because of burn-out.

The current definitions of equity = fairness is also misleading in that the concept involves more than treating people fairly. Most talk about inclusion of people and ensuring diversity. Most tie creating socially just workplaces and societal institutions to discussions of equity. Most also understand equity in practice means societal institutional adjustments to correct institutionalize inequities. To drive this home, nonprofits have become more concerned about putting band aids on existing social problems rather than trying to actually solve the problem. That has greatly affected the typical service package of most human service nonprofits. To seek equity the nonprofit sector must be involved in changing itself (institutional change) so that it can help created the changes needed in other institutions that perpetuate injustice.

Who decides what is equitable? While the Creator assigned moral status and value to all people and people’s moral status and worth are not up for grabs by whomever tries to be superior, people decide on matters of equity. A group’s practice of equity is contingent on the beliefs a group has and how effective and willing they are to treat others fairly and justly. Leaders set the tone and direction, but all affiliated with the organization make daily equity decisions relative to their interaction with clients, volunteers, donors, funders, leaders, staff, other nonprofits, community leaders, and board members.

Cultures value certain things and human characteristics, and not others. Sub-cultures can establish belief and value systems that allow people to kill others, deny them resources, put the blame for their conditions on them, and talk openly and blatantly about characteristics they find inferior in some way or another. It is people who evaluate a situation as ‘just, fair, inclusive, diverse’.

People collectively can muster up the courage to look at how they treat others. People can create a collective will to change long standing traditions and practices. Organizations don’t do this, people do! It is only when people are willing to respect differences and see the varied effects they have on people’s condition and life that they can begin to change traditions, institutional structures and processes that are unfair, unjust, and deny access to things and opportunities. We all have some blinders as to our prejudices. We all have areas where we absolutely think the way we think and act is right and the rest are just plain stupid and wrong!


So, the one author discussed above it right. Practicing equity is very messy, challenging, and hard and will require each of us, our basic institutions, our policies, our professional practices to change. Leaders bear an extra responsibility to ensure an equitable workplace exists. In the going to scale literature, leaders discuss what happens when they start trying to practice equity. Their insights are well worth the read.38

In the workplace, a good place to start is as the Americans for the Arts did. Talk about inclusion, diversity, and equality and equity and what these concepts mean. Create meaningful definitions to guide the organization’s work. Create the action principles upon which the nonprofit will operate.Kania and Kramer indicated that collective action requires six main things: a common agenda, shared measurement systems, mutually reinforcing activities, continuous communication, backbone support organizations, and practicing equity.39

In the literature on equality and equity four main areas are often discussed: opportunity, participation, functional capacity, and relational equality and equity. They are as follows:

Opportunity Equality and Equity

Society’s leaders decide what basic opportunity rights should be available to all. Because each has the same moral status, what rights does each have? For example, education of women and blacks was not viewed as a basic right under the principle of equality until just recently and in some countries certain racial groups, and women and girls, irrespective of race, are still denied this opportunity. The right to health care is now being hotly debated. Some believe this is a basic right because all are equal in moral status. Other do not believe this is a basic right. It’s a privilege. Time will tell whether enough people the US society believe the right to health care is an ‘unalienable right’ or not in light of our equal moral status.

Relative to the nonprofit workplace, when equity is practiced several behaviors may be evident. How would practicing equity and acknowledging equal moral status affect your agency in the areas listed?

• Hiring practices• Performance evaluations• Interactions among board, CEO, other executives, staff, clients, donors, funders• Grievance policies and processes• Service agreements with government and foundation leaders• Professional development opportunities

38 See for example Kania, J., & Kramer, M. (2015). The equity imperative in collection action In Stanford Social Innovation Review as retrieved at https://ssir.org/equity_and_collective_impact/entry/the_equity_imperative_in_collective_impact and Blackwell, A.G. (2015). Equity matters in collective impact. As retrieved at http://collectiveimpactforum.org/blogs/1/equity-matters-collective-impact ; and some of the readings from the National Equity Project as http://nationalequityproject.org/ .39 See for example Kania, J., & Kramer, M. (2015). The equity imperative in collection action In Stanford Social Innovation Review as retrieved at https://ssir.org/equity_and_collective_impact/entry/the_equity_imperative_in_collective_impact


• Resource allocations• Strategic planning• Accountability criteria and processes• Program/service evaluations• Organization outcomes and impact assessments

The ideal in seeking opportunity equality may be when each person’s prospects as a fully functioning member of the nonprofit depends only on the effective application of her capabilities, plus her ability and willingness to be good to others, as well as provide services that are valued by others.40 Leaders strive to provide a continuous learning environment for staff, volunteers, clients, and the board so they grow and advance their capabilities to respect each other, value each other as having the same moral status they have, and treating each other fairly and justly. Opportunity equity is what nonprofit leaders do to ensure there is fair and just access to opportunities and that all opportunities are available to all based on merit or a first come, first served principle. Customers and employees will tell you or someone in the organization what isn’t fair or just. It depends on the communicative and relational climate present who they tell. Some nonprofits create mechanisms to better ensure there is fairness in each person’s opportunity for selection, when there are more customers than can be served. For example, schools in many states have a lottery system in place to govern selection bias. First come, first served. Each person has opportunity based on when they enrolled and their position on waiting lists. Another example, is what is done when there are more people needing food than there is supply. Some nonprofits work with partners to make sure all needing food receive it, either from them or their partners. What is and will your organization do to ensure equal opportunities? What will you do to provide equitable opportunities? In what ways does your nonprofit provide equal and equitable opportunities to volunteers, employees, board members, executive leaders, networked partners? What do you collectively desire to do? What tangible plans are in place?

Participation Equality and Equity

The basic principle behind participation equality is that any individual affiliated with the nonprofit who has the same ambition to influence the political process of the nonprofit and the same talents of political persuasion and organization should have equal prospects of influence on the democratic political process of the nonprofit.41 The equity principle is that people with differing abilities and opportunities to affect the democratic political process in a nonprofit are given opportunities to, for example, voice their concerns, share how their situation is affected, and are given access to voting on what is done. Their participation rights are secured by treating them fairly and justly in light of the differences in their abilities to effectively influence the political process.

40 See Stanford Encyclopedia on Philosophy at https://plato.stanford.edu/entries/equality/ 41 Christiano, T. (2008). The constitution of equality: Democratic authority and its limits. Oxford: Oxford University Press; Walzer, M. (1983). Spheres of justice: A defense of pluralism and equality. New York: Basic Books. Estlund, D. (2000) Political quality. In Social philosophy and policy,17, pp. 127–160. Cohen, G. A. (1989) On the currency of egalitarian justice, Ethics, 99, pp. 906–944.


The political process in a workplace is influenced by doing such things as creating ways for employees, volunteers and clients to have a say in what and how things are done, providing discussion forums in which there are no agendas or pronouncements, but where anyone can ask anything they want pertaining to how the nonprofit does business, what its outcomes are and how to improve them. Another example is creating a relational climate where employees feel free to go to their supervisor to discuss concerns, ask questions, say they are not doing something correctly but need help to figure out how to do it better. Providing opportunities for all to participate in decision making on organization and service changes that affects their work is another example. Participation equality and equity are fostered when all are provided factual information about workplace issues, effects of their work, and what stakeholders say about the organization and its performance. One application of this principle at the nonprofit executive level is a CEO should have the same ability to influence the democratic political voting process on business items in a board meeting as do other board members. They have just as much responsibility to ensure the corporation’s fiduciary duties are upheld as do all board members. Another would be that a board member without wealth or status, has the same ability to influence the board’s political process as does the board member with wealth or status. People don’t defer to wealthy or well-known members and disengage from their duties.

Many high performing nonprofits recognize interested people internal and external to the nonprofit will exercise their right to participation in a nonprofit’s life, operations and services. That is partially why stakeholder surveys are done so that more voices are heard and must be accounted for by those internal to the organization that are in authority positions. CEOs recognize multiple views and assessments of their performance help keep in check board members who believe they are the only group that matters relative to organizational and leadership accountability and assessments of performance.

CEOs practice participation equality and equity. Conversely, CEOs have enormous power and authority because of their daily operation’s knowledge, whereas the board is volunteer, spends limited time and has limited understanding of the day to day operation, and the dynamics at play within the organization. If not careful, some may begin to think they are of more worth than the board members and start treating them accordingly. One sign that the CEO is not treating the board as having the same moral status is when a CEO withholds certain information about organizational performance and outcomes that may raise questions about their performance or the organization’s health.

Many board members do not want to over-step the CEO’s rightful role and don’t want to talk to other members of the organization without the CEO’s knowledge. The challenge for the CEO is to not withhold from the board important discussions about operations and outcomes. Effective CEOs inform board members about what is working well and what isn’t. They review what grievances and human relation issues are present and could become problematic. Budgets are not manipulated for the board’s preview but accurately reflect the way in which accounts are handled, kept and presented to the CEO. Major ventures into new areas by the CEO that signals shift in resources are discussed with the board rather than them being told after the fact. That doesn’t mean the board doesn’t


give the CEO the management authority to have vision and deal with daily events. Instead, the CEO and board that has built strong relationships will be communicating back and forth as things develop. There will be collective thinking, wisdom and action.

A fundamental trust in board leaders and board leaders’ fundamental trust in the CEO is required. A board member that is most crucial relative to the CEO-Board trust relationships that is empirically linked to growth is the Board chair/president-CEO relationship.42 When CEOs feel free to discuss failures and relational dilemmas, as well as all that is good and going well in the organization without fear of being fired, or the situation taken over for the board to manage, the CEO is significantly more apt to build capacity than those that have a less trusting relationship with the board chair. Some board members are prone to ‘fix it’, if a matter is brought to their attention, so exercising equity principles need to be consciously present and facilitated to tame this propensity.

Dealing with government and for-profit authorities. When government agencies have a financial relationship with area nonprofits, attention must be paid to the principle of participation equity. A funder is not superior to a nonprofit leader. Modern day attempts to declare the board of a nonprofit as nonexistent do exist, particularly with some government agencies, funders, and for-profit service providers. Perhaps the most blatant examples recently are found in the charter school area and the tug of authority and control wars waged between the charter school, some state departments of education, and some contracted for-profit service providers. Each wants ultimate control with the nonprofit CEO and board caught in the middle.

Examine agreements and service contracts with government agencies and foundations to ensure participation equity is ensured. Many readers can think of situations they have experienced in which great participation imbalances were present. For example, some state departments of education may exert such control over their charter schools (which are incorporated as separate 501c3 entities) that the nonprofit’s board of directors and paid executives loose much of its ability to operate autonomously and care for the corporation’s interests. Some for-profit curriculum management companies secured by charter schools also try to retain the rights to hire the charter school’s CEO and manage the school’s finances which robs the charter school board and staff from fully exercising their fiduciary responsibilities. The board’s fiduciary management is hampered in adhering to two legal principles of nonprofit fiduciary management: duty of loyalty and care. Some funders fail to recognize that once they give public money to the nonprofit, they don’t own the money anymore. It becomes an asset of the nonprofit and under its leaders’ fiduciary responsibility. When this happens, the board is robbed of an ability to be the fiduciary agent of the organization.43

42 In a recent statistically valid and reliable national study, the one trust relationship that was found most significant was a positive trust relationship between the CEO and board chair. When the CEO didn’t have a high level of trust in the Board chair, it predicted a lack of the CEO’s intention to build capacity and a lack of the CEO’s intention to build capacity was significantly linked to no growth or decline in budget over a five-year period. See Brown, K. (2012). Nonprofit directors’ intention to build capacity. Ann Arbor, MI: ProQuest.43 It is acknowledged that charter schools enter into a service agreement or grant agreement with the for-profit provider or department of education, but often the language of these agreements are not negotiated so that the nonprofit retains control of key features related to their fiduciary responsibilities. All such agreements need to be reviewed carefully by board and legal counsel.


Equality, equity and founder issues. While there are many fine examples of founders not “lording it over” other leaders and board members, ensuring participation equity in board decision making must be guarded. For example, when a founder is given life-time emeritus status on a board and short-circuits CEO and/or other board member’s decision-making rights and opportunities on what and how things are done, it can lead to some embarrassing and unnecessary community disputes, as well as public relations nightmares. This situation also can occur with other influential board members who are overzealous in their position of authority44.

One nonprofit we were involved with as a mediator several years ago was commissioned by a city council to resolve a dispute between two well-known nonprofits in the community. Both organizations provided some services that were the same, although the one nonprofit had consciously avoided duplication of the same services with clients they knew were affiliated with the other nonprofit. The founder was given life-time membership on one of the nonprofit’s board. For all practical purposes, the organization was managed by the founder, even though there was a CEO. The founder believed the nonprofit should take no federal or state money to avoid being control by government so prohibited the organization from seeking such money, although millions were available related to the nature of their services.

Another nonprofit was formed and serviced largely the same geographic area. Within a few years, they grew very large. They were managed effectively, had an active, cooperative board of directors with a good working relationship with the CEO, and were very good at getting federal and state grants for large sums to service specific client needs. The founder of the other nonprofit was struggling financially. The founder went to cronies on the city council to try to get the city council to regulate and limit the work of the competing nonprofit. All sorts of misrepresentations were made to council members.

The city council called for a mediated session in which both nonprofit CEOs and executive board members were asked to come. The specific request the founder made to the council was that the other organization give her organization money for specific services they were providing and stop providing specific services that the founder’s nonprofit was providing, even though it was determined and the founder was told that the other nonprofit was not duplicating services to the same clients. City council representatives asked each organization to bring their CEO and Board’s executive committee to the mediated session. The CEO of the founder’s organization came, as did the founder. No other board member came. It was obvious looking at nonverbal interaction that the CEO did not agree with the founder and was embarrassed by what was happening and said. The CEO was not allowed by the founder to say anything during the meeting. When the CEO was asked a question, the founder cross-talked the CEO and the CEO became silent. The other nonprofit CEO, and executive board team came to the session. Their verbal and nonverbal interaction was markedly different from what was present with the other nonprofit.

During the mediation process, the competing organization graciously and abundantly offered to

44 It is acknowledged that the majority of founders understand the need to turn the reins over to the next generation and don’t stay on boards and only provide advice when asked.


work out an arrangement of services based on geographic boundaries of specific services and said several times that no duplication of services was occurring now to their knowledge. They also were very generous in offering to give the other nonprofit substantial money so that more customers could be served. However, it was explained repeatedly that the money the founder’s organization would receive was federal money, would need to be given as a sub-contract agreement with them, and reminded the founder that she said she didn’t want federal or state money!

The founder insisted that money, other than federal or state funds, that the organization had be given. The other organization continued to stress that all their money was public money and that donations were restricted and couldn’t be given to them without violating their donors’ wishes and understandings.

The founder’s nonprofit left with nothing but a reduced public image. The CEO apologized once the founder was out of the room. The CEO resigned shortly after the meeting. They lost credibility with major community leaders. The growth and stability of the organization continued to stall for several years thereafter. The growth in staff, revenues, geographic coverage and services of the other organization grew by more than 20% per year thereafter. They are now a multi-million-dollar networked organization operation.

The CEO and board members of the founder nonprofit were not treated equally by the founder and equity in participation and decision making was not present. One board member, the founder, tried to represent the whole of the board’s view, even though it did not and legally could not. The principle of participation equity, among others, was violated. Position and status must not be used to deny participation equality and equity.

Protecting freedoms. It is not without notice that internationally, when leaders at the nation state level want to control the life of society, the first sector they hit is the civil society sector (i.e. nonprofits and grassroots unincorporated groups). That’s where equality and equity are practiced and promoted the most. That’s the first sector to be heavily regulated, and as power increases, that’s the first place where civil society leaders are regulated, jailed and killed. This author has experienced it all, over her years while engaged in international community development work. The principles of equality and equity must be exercised to foster democracy in the nonprofit sector, in its many forms. Over regulation by any group, whether it be government, business, or the nonprofit sector, needs to be a concern. Your nonprofit’s and your personal freedoms are at stake!

However, many national leaders and nonprofit law leaders believe the nonprofit sector today is minus the same level of monitoring as the for-profit sector has. Since 1998, they have proposed various regulatory and monitoring agency models to more thoroughly regulate the nonprofit sector’s business practices to ensure they adhere to nonprofit legal standards. Where they reside is dependent on the author. Some call for state level government or nonprofit models and others for federal level


agency or joint agency models.45 Most authors currently think the national watch dog groups, while revealing some issues and wrong doing, are not capable of regulating the nonprofit industry as is done with for-profits. Some of these models call for additional fees to be imposed on the nonprofit to fund the regulatory monitoring agency.

Relative to the discussion on equality and equity, there is some concern among leaders proposing the various regulatory models that some nonprofits may be subject to unfair, unjust politicized treatment should a particular nonprofit’s leadership be viewed negatively within the current power leaders’ circles or if a particular cause was not within the value set of current powerholders. As a result, some leaders say it would be better to just tax all businesses and do away with the ‘nonprofit’ status as we now know it. Time will tell where all this discussion of the last twenty years goes!

Equality and equity in grievance practices. Participation equality also ensures people affiliated with the organization are given the same rights to express grievances and voice their sense of right or wrong interactions among members within the organization. A person’s moral status must be respected. The degree to which all claims are heard with the same consideration is equity in practice. High performing nonprofits ensure individuals are given opportunities to voice complaint, if they feel basic moral rights or ethnical practices have been violated. With rights come responsibilities. If moral claims are waged, the person waging them is responsible to articulate clearly what the claim is and provide reasonable evidence of the claim. Conversely, people in positions of authority are responsible to hear claims of all and in a fair, consistent manner. That’s participation equity.But because all nonprofits don’t practice participation equity and honor participation equality, society has created additional avenues for people with claims to have their claims heard, if the nonprofit decides to not hear it, bury it, or dismiss it, or does nothing about the claim. If a moral or ethical grievance is against a direct supervisor, there needs to be an alternative grievance route to go. The board hears complaints about the CEO and also many require a summary of all grievances that have been heard at all supervision levels and the resolution. Most states provide people with grievance options beyond the nonprofit in cases where a person believes the nonprofit board also did not afford them participation equality and equity in the hearing or resolution of their moral or ethical claims.

Even beyond the state level, the federal government provides a process by which claims heard at the nonprofit and state levels can be addressed at the federal level. Leaders practice participation equity when they set up grievance systems that are fair, consistent, open to all claims, with no one’s claims suppressed, and when those grieving are free from punishment, threat, or character assassinations. Policies and procedures are advertised and followed consistently with all. They are reviewed yearly so that all are informed, aware, and understand them. Action is taken if consistent, fair treat of claims is not followed.

For now, even the IRS asks nonprofits to report if they have a grievance and conflict of interest

45 See the discussion of the various models proposed and why they are being considered at Kellenberger, Maxwell B. (2015). Policing charitable organizations: Whose responsibility is it? Louisiana Law Review, Vol. 76, Number 2, Winter available at http://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=6559&context=lalrev


policies. The IRS is not set up to require compliance, but responses are monitored by leaders in the nonprofit sector, some state attorney general’s offices, researchers, as well as federal legislative committees. These basic policies help nonprofits practice opportunity and participation equality and equity, as well as show evidence of acknowledged fiduciary responsibility.

Giving freedom to do one’s job. Each person within the nonprofit should have the right to carry out their prescribed job description to the best of their capabilities so long as she does not violate the rights of others not to be harmed in certain ways—by force, fraud, coercion, theft, or infliction of damage on person or property. This is often referenced as participation equality.46

CEOs and all other nonprofit staff need the freedom to execute job duties in the way each person sees is the best way for them to get to the outcomes desired and agreed to by all. If specific approaches or techniques are to be used to reach stated outcomes, it is clarified either before hire or during performance reviews. This area is becoming more important because more are asked to conform to evidence-based service delivery, operational, and administrative practices that were created by others but are now a part of joint venture agreements one nonprofit has with one or more other nonprofits.

Open discussion must occur regarding the leadership and management autonomy one has in order to carry out strategic actions in the way they feel is most appropriate given their knowledge of the full dynamics of the organization, its clients, and context. Often, in such joint ventures the outcomes are made clear and each entity’s leadership has the freedom to execute following certain principles but with a wide latitude in what and how things are accomplished. The CEOs are held accountable for the outcomes and not just the process used to get to those outcomes.47

CEO performance reviews. By examining the major sources and kind of information used by a board when CEO performance is evaluated, one can tell where the CEO is apt to spend the most time and attention.48 Is your CEO evaluated based on the outcomes of performance, or the inputs and processes used, or the policy adhered to, and/or the assessments of a wide variety of nonprofit internal and external stakeholders? Examining many nonprofit websites, one finds only inputs and processes reported in annual reports. Many nonprofits don’t provide the interested public with annual reports of performance at all.

In the literature, high performing nonprofit leaders evaluate CEO performance based on inputs, process, outcome and impact assessments, and gather information from a variety of the organization’s internal and external stakeholders.49 In a recent study, many CEOs across the U.S. were not completely satisfied with the way they were evaluated and the freedoms they had to execute strategic actions in the way they found more desirable and beneficial to the organization, in light of its

46 From the Stanford Encyclopedia of Philosophy on Equality and Equity as retrieved at https://plato.stanford.edu/entries/equality/ 47 However, ‘good’ outcomes are not justified using immoral and unethical means. 48 For further discussion see NANOE’s Growth by evaluating services, operations and impacts, another booklet in NANOE’s Growth Series.49 See the glossary in the back of this booklet or footnote 4 for a definition of stakeholder.


cultural, political, and social dynamics.50 Often it is because they don’t feel empowered by their board to take the capacity building actions they know they should. The nonprofit scaling literature links high performance with CEO accountability based on multiple internal and external stakeholder assessments and on information about outcomes and impacts achieved. The stakeholder assessments often reveal the value of the organization to the community.51

What is the freedom given to executive leaders to lead and administer in ways they think are most effective? High performing board members and CEOs talk openly about the management autonomy they give the executive staff to spend money in the ways most advantageous to the organization, the basis upon which their performance will be judged, and the areas of leadership and management they believe are not up to speed.52 They negotiate action plans for correction. Board members find ways to survey a statistically representative group of internal and external stakeholders (volunteers, donors, community leaders, funders, employees) relative to executive leader performance to ensure stakeholder participation equality is exercised, and stakeholder participation rights are present in important leadership discussions.

Do no harm, strive to nourish and flourish. A basic equality principle is that each person in the organization is not to be harmed or impeded by others in the organization, unless she voluntarily waives any of her rights based on moral status claims, or voluntarily transfers them to another, or forfeits them by misconduct. In what ways are current board actions impeding or harming executive leader actions? In what ways are current executive leader(s) practices impeding or harming board member actions?

Decide and act collectively. To ensure participation equality in corporate decision making, most State nonprofit laws and nonprofit by-laws indicate that the board must have a quorum present when decisions are made and that no decision can be made and considered a board decision, if the board hasn’t formally meet, made a motion, and taken a vote, with a quorum present at the time of the vote. If this procedure is violated, most directors’ insurance will not protect the board or its members should negative consequences happen. The board is to act corporately, not individually.

50 Brown, K. (2012). Factors that affect nonprofit directors’ intention to build capacity. Ann Arbor, MI: ProQuest; Preston, J. B., & Brown, W. A. (2004). Commitment and performance of nonprofit board members. Nonprofit Management and Leadership. Vol. 15, Issue 2, Winter, pp 221-238; LeRoux, K., & Wright, N. S. (2010). Does performance measurement improve strategic decision making? Findings from a national survey of nonprofit social service agencies. Nonprofit and Voluntary Sector Quarterly, Vol. 39, Issue 4; Herman, R. & Renz, D. (2004). Doing things right: Effectiveness in local nonprofits: A panel study. Public Administration Review, Vol. 64, Issue 6, Nov., pp 694-704.51 Williamson, S. (2001). Performance evaluations: Stop the Insanity! Nonprofit Quarterly as retrieved at https://nonprofitquarterly.org/2001/06/21/performance-evlautation-stop-the-insanity ; Connolly, P., & York, P. (2003). Building the capacity of the capacity builder. The Conservation Company, September as retrieved at http://www.tccgrp.com/pdfs/buildingthecapacityofcapacitybuilders.pdf 52 Obviously, there needs to be transparency between board and CEO and accountants so that the board is able to see the kinds of expenditures made and to negotiate acceptable spending principles, including the bases for giving some and not others pay increases, whether or not the CEO can move money saved in one line item to another, and at what levels the CEO is allowed to spend without board approval. But we have seen some ridiculous actions by board members calling for the CEO’s pay reduction because they spent 10 cents per copy on circulars rather than 5 cents! We have also seen board treasurers examine the books and determine there was a $100 difference in what was presented to the board on a line item and ask for the CEO’s dismissal!


Acting corporately is a tough principle to work out in ways that ensure quality relationships at the board level and between the board and staff. Community-based nonprofits are freer with their communications among board member than are those that receive state funds such as schools, health agencies, disability agencies and others that are under service agreements in which public announcement of all formal board meetings is required. Many board chairs of these types of nonprofits refuse to engage in email or any written form of communication, including not copying all board members on discussions via email because it may be viewed as convening a board meeting for which advance public announcement did not happen and therefore a denial of the public’s right of participation were denied. Some board chairs refuse to answer phone calls from board members regarding issues and defer all conversation to board meetings.

While establishing committees is sometimes used as a mechanism for discussion and communication at other than formal board meetings, it can mean that a few board members are ‘in the know’ and others aren’t. Participation in decision making may become unequal and unequitable. A few board members may have established relationships with each other and learned to trust each other, while the majority don’t know each other and have little or no ability to talk with each other except through formal communications and meetings where time is limited to an hour or two max. In these circumstances, one sees a lot of disengaged board members. The challenge for all is to create board communications that honor the laws they must abide by, and at the same time, build relationships and interactions that allow proper time for all to participate in decision making processes.

Fiduciary duties and practicing equality and equity53. The directors (board and staff) have three main fiduciary duties. These duties are best exercised by building relationships based on the principles of equality and equity. They speak to legal standards used to ensure equality of relations, participation, opportunity and capability while focusing everyone’s attention on corporate interests, not self-interests. These duties are stated in federal and state laws (e.g. state nonprofit law, IRS regulations), as well as common law. Nonprofit leaders are to protect and defend the rights and interests of the corporation in all they do (called the inurement principle54). In law, the primary fiduciary duties are as follows:

• Duty of Care: The directors (staff and board) are to care for the corporation as any ordinarily prudent person in a similar position would care for it under similar circumstances.55 They care for the corporation in a way that they reasonably believe to be in its best interests. They care for the corporation’s interest “in good faith”, meaning with a sincere belief and motive,

53 This section is based on Kellenberger, Maxwell B. (2015). Policing charitable organizations: Whose responsibility is it? Louisiana Law Review, Vol. 76, Number 2, Winter available at http://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=6559&context=lalrev ; Hazen, Thomas Lee, & Hazen, Lisa Love. (2012). Punctilios and nonprofit corporate governance: A comprehensive look at nonprofit directors’ fiduciary duties. University of Pennsylvania Journal Business Law, Vol. 14, p 347, 403, 355. 54 For those needing a refresher see Fortenberry Law at http://www.fortenberrylaw.com/inurement-prohibition-nonprofit-organizations/ and IRS at https://www.irs.gov/pub/irs-tege/eotopicc90.pdf 55 Brody, Evelyn. (1998). The Limits of charity fiduciary law, 57 Maryland Law Review, Vol. 57, p. 1400 & 1420.


and without malice or desire to defraud others or the corporation.56 Each member must be honest in their interactions with others in the organization and with interested publics. They are honest in their promises and in all transactions done on behalf of the corporation. Each board and staff member engages in reasonable inquiry about corporate transactions. They ask questions and seek information sufficient to understand essentials needed to make wise, informed decisions they believe to be in the best interest of the corporation.

• Duty of Loyalty: All directors (board and staff) are required to be loyal to the corporation they serve. Loyalty must be undivided and unselfish. Directors’ actions, position of power and authority, roles and responsibilities are done considering what is in the corporation’s best interests aligned with its mission.57 No action or decision is made based on self-interest or the interests of other stakeholders or entities, no matter whether charitable or for-profit.58 A director can breach the duty of loyalty by disclosing confidential information, usurping a business opportunity from the charity, unlawfully distributing charitable assets, or using organizational funds for improper purposes.59 A common example of breaching this duty is when a director serves on two boards that are seeking a major gift from a specific donor or are wanting to purchase the same parcel of land or buildings.60

• Duty of Obedience: Directors (board and staff) are required to advance the nonprofit’s mission, to be faithful to its purposes and goals, and adhere to and follow all laws affecting the nonprofit.61

In this regard, one executive leader expressed the connection in his mind among equality, equity and his fiduciary responsibilities in this way:

“Because I believe all people associated with the organization are my equals, I listen and don’t dismiss their input. I understand that while I or we may think something is ethically and morally ok to do, if a find several others in the organization or significantly familiar with our work don’t agree,

56 Freemont Smith, Mario R. (2004). Governing nonprofit organizations.57 Vachon, Christyne J. (2011). Blurring. Not Fading. Looking at the duties of care and loyalty as nonprofits move into commercialism, Transactions: Tennessee Journal of Business Law, Vol 37, No 48.58 Hazen, Thomas Lee, & Hazen, Lisa Love. (2012). Punctilios and nonprofit corporate governance: A comprehensive look at nonprofit directors’ fiduciary duties, 14, University of Pennsylvania Journal Business Law, p 381.59 Vachon, Christyne J. (2011). Blurring. Not fading: Looking at the duties of care and loyalty as nonprofits move into commercialism, Transactions: Tennessee Journal of Business Law, Vol. 37, No. 48, p. 49.60 Freemont Smith, Mario R. (2004). Governing nonprofit organizations. P 436. 61 See Hazen, Thomas Lee, & Hazen, Lisa Love. (2012). Punctilios and nonprofit corporate governance: A comprehensive look at nonprofit directors’ fiduciary duties, 14, University of Pennsylvania Journal Business Law, A third duty, the duty of obedience, is often included, but the most commonly accepted duties are the duties of care and loyalty. Id. at 388. The duty of obedience captures the idea that a director is under an obligation to ensure that the corporation is acting within its stated purpose and mission. The duty of obedience is a reflection of the age-old ultra vires doctrine that prohibits corporate acts that go beyond the corporation’s mission and purpose ; GrantSpace, a service of the Foundation Center for additional discussion and references at http://grantspace.org/tools/knowledge-base/Nonprofit-Management/Accountability/legal-duties-of-the-nonprofit-board


we usually don’t proceed. Ultimately, whether I have fulfilled my fiduciary duties is not for me alone to decide, but is based on the consensus of a significant number of our internal and external stakeholders as to what is considered justifiable, fair and legal. Some CEO and board actions that are not fulfilling the fiduciary duties are no brainers. But there are other areas more difficult to sort out what to do. Creating fair and just opportunities, participation, capacity, and relations have required us to do continuous soul searching. Every year, we have to examine our policies and practices to ensure they have remained fair and just given the changing times and circumstances we find ourselves in. To me, practicing equality and equity in our nonprofit is a life-long, continuous learning process, but I believe our work environment is by far richer and happier than it once was! People are coming to us wanting to work for and with us. That was not always the case!”

Capability or Functional Equality and Equity

Amartya Sen, a Nobel Prize economist who described community and national development as ensuring freedom, suggests the need to value equal real freedom, as described below, and more specifically, basic functioning capability equality.62 Making sure women and girls around the world have the same equal opportunity for education is but one example that also guarantees that all people can function to their potential. In the United States, government, foundations, some for-profit and many nonprofits work to make sure children and youth who are not functioning at grade level or who start school not functioning at the same level as their peers are provided with opportunities to build functional capacity. At the organizational level, many years ago foundations recognized that support organizations were required to help build more capacity within the average nonprofit in the USA. That gave birth to many nonprofits that seek to build the capacity of nonprofits. However, thinking about capability equality in a given nonprofit is not as well understood or practiced by many.

62 Sen, Amartya. (1980). Equality of what? in S. McMurrin (Ed.). (1980). The tanner lectures on human values. Salt Lake City: University of Utah Press, Vol. 1.; reprinted in Sen, A. (1982). Choice, welfare and measurement. Cambridge: MIT Press, pp. 353–369. Sen, A. (1992). Inequality reexamined. Cambridge: Harvard University Press; Foster, J., & Sen, A. (1997) On economic inequality. Oxford: Clarendon Press, Expanded edition with annexes; Sen, A. (2009). The idea of justice. Cambridge, MA: Harvard University Press.


What kinds of capacity do high performing nonprofits build?63

Connolly64 and York categorizes the wide range of capabilities, knowledge, and resources (i.e. “capacities”) needed by nonprofits to be “vital and effective in staying true to their mission”.

Four core types of capacity are identified. These are broadly defined as follows:

Adaptive Capacity: The ability of leaders to monitor, assess, and respond to internal and external changes.

Leadership Capacity: The ability of all organizational leaders to inspire, prioritize, make decisions, provide direction and innovate, all to achieve the organizational mission.

Management Capacity: The ability of leaders to ensure the effective and efficient use of organizational resources.

Technical Capacity: The ability of leaders to implement all the key organizational and programmatic functions.65

Connolly’s nonprofit organizational capacities model is a modification of this. In Connolly’s model66, each type of capacity is concerned with different key organizational functions or skills. Adaptive capacity deals with assessments of needs, the organization and program, knowledge management, strategic planning, and collaborations and partnerships. Leadership capacity includes board and executive leadership development, and way leadership transitions are handled. Management capacity includes human resource development, internal communications, and financial management. Technical capacity indicates ways the organization develops competencies as an organization and within people, including service delivery, evaluation, outreach and advocacy, marketing and communication, legal, fundraising, generating earned income, accounting, financial management, and technology development competence.

The nature and extent of the four types of capacities identified by Connolly differ according to the placement of a particular nonprofit organization within one of five identified life cycle stages.67 This model is now used extensively by capacity building consultants in the United States

63 This section is from Brown, K., & Robinson, K. (2016). Defining capacity: How do nonprofit leaders define capacity and so what? Washington D.C.: National Association of Nonprofit Organizations and Executives. This research brief is found in the NANOE Central, Capacity Buildings Library. 64 Connolly, P., & York, P. (2003). Building the capacity of capacity builders: An executive summary of a study of management support and field-building organizations in the nonprofit sector. New York, NY: The Conservation Company, September65 See footnote above.66 Connolly, P. (2006). Navigating the organizational lifecycle: A capacity-building guide for nonprofit leaders. Washington, DC: BoardSource, pp. 73-85.67 Footnote above pp. 88-92.


and internationally as an important framework for identifying and measuring types of nonprofit organizational capacities appropriate at a given life cycle stage.

In more recent years, Connolly and York developed further their capacity building model into an organizational self-assessment tool (The Core Capacity Assessment Tool or CCAT) and for several years now have gathered a very large nonprofit database using the CCAT survey (currently 5000+ cases) from which to do a variety of research projects with various universities and foundations.68 They use this same tool as a basis for research done under contract with private foundations, companies, nonprofits and government. Nonprofits are encouraged to use the tool because, with the very large comparative database, one’s performance can be evaluated and compared to other similar organizations. This motivates leaders to develop capacity in areas that have been neglected. It also establishes a comparative basis to judge the organization’s overall performance.

Among directors of 318 nonprofit organizations responding to a 2003 study, Paul Light69 found that directors said there were four primary purposes to their capacity building efforts. Eighty-eight percent of respondents had improved external relations. Eighty-six percent had worked to improve internal structure. Eighty-five percent had acted to improve internal management systems. Finally, seventy-seven percent had worked to enhance internal leadership of the organization. As a result, Light adopted these purposed-driven capacity building categories to frame his analysis of capacities and capacity building efforts. As Table 1 shows, Connolly’s and Light’s capacity categories have one common label (i.e. leadership) but they group various capacity building functions under different headings because of the differences in their overall conceptual framework and study purposes.Perhaps the most noticeable difference between these two frameworks is how the authors each conceive of management capacity. Light’s list of components is more oriented toward organizational capacity building, while Connolly’s is more oriented toward the human resource management. Connolly’s categories isolated the ability of the organization to manage change (i.e. adaptive capacity), whereas in Light’s categorization, monitoring and evaluation functions (used to identify areas that need to change) are considered a part of internal management system and external relations capacities.

High performing nonprofits continuously develop and update their capacity. Light and Connolly’s capacities are associated in a vast literature on nonprofit growth. They are useful to evaluate areas of your organization that may need further development. CEOs and board members practicing equality of functionality or capability will strive to continuously build human and organizational capabilities in all areas of organizational life. Mechanism will be present so that all people can suggest areas that need improvement. One area will not be excluded, under nourished, from development.

68 See the TCCGroup for further description of this assessment tool at http://www.tccccat.com/about-the-ccat 69 Light, P. (2004). Sustaining nonprofit performance: The case for capacity building and the evidence to support it. Washington, DC: Brookings Institution Press, p 57.


Table 1 Comparison of Light’s and Connolly’s Capacity Building Categories

Light 1 Connolly 2External Relations Capacity

• Collaborations/partnerships/alliances• Mergers• Strategic planning/mission• Fundraising/development• External communications/• marketing/media relations• Program development/redesign• Facility expansion/improvement• Customer focus/surveys/input

Adaptive Capacity• Environmental learning• Organizational Learning and planning• Programmatic learning• Decision making • New resource acquisition• Organizational sustainability• Program sustainability

Internal Structure Capacity• Reorganization/restructuring• Team building/staff morale • Staffing levels/quality• Diversity initiatives• Rainy day fund/reserves• Innovation fund• Internal communication• Contraction/downsizing

Technical Capacity• Service delivery skills• Evaluation skills• Outreach and advocacy skills• Marketing and communication skills• Legal skills• Fundraising skills• Earned income generation skills• Accounting skills• Facilities management skills• Technology skills

Leadership Capacity• Board development/management• Leadership development/management training• Succession planning/search• Change in leadership• Greater delegation/participation/change in

management style

Leadership Capacity• Board leadership development• Executive leadership development• Board to Executive relationship building• Leader influence• Community leadership and credibility• Leadership sustainability

Internal Management Systems• Technology planning/acquisition/use• Accounting/financial management• Personnel system• Staff training/development• Formal evaluation• Organizational assessment/accreditation processes• Outcomes/results management/accountability

measures• Improved processes/procedures

Management Capacity• Staff development• Supporting staff resource needs• Program staffing• Managing program staff performance• Managing all staff performance• Conveying value of staff• Assessing staff performance• Problem solving• Volunteer management• Manager to staff communication• Financial management

Areas that we see directors of nonprofits at the $500,000 budget level and below struggle to build are the development of finance growth and management capacity, human resource management, IT, public relations and evaluation capacities. Often, CEOs know these areas need enhancement but continue to put off development, while using all resources to build up program and service delivery areas. For many reasons, this is a misguided management practice and doesn’t practice functional


capacity equity among all units of the organization. NANOE leaders have been criticized for suggesting that programs be terminated or reduced, or expansion efforts suspended until other areas of the organization catch up, including building the capacity to grow revenues, evaluate outcomes and impacts, and develop, support and protect human resources. However, if these under-nourished areas grow, service capacity will have the fuel it needs to grow too!

Related to ensuring capacity equality, is your nonprofit continuously building capacity? What parts of the organization continue to be denied capacity development? What areas are more just and fair to workers and customers than others? What are your plans for building capacity? What capacity building areas will produce the most growth? What organizational areas need work to ensure people’s moral status, and their fair and just treatment?

Relational equality and equity70

Relationships between people in and affiliated with the nonprofit ebb and flow as each’s needs, interests, and development changes. Practically, what matters is how people define equality in their relationships through open communication with each other about what constitute a balance of power and control in the relationship.

In marital counselling a balance in equality is often discussed through a series of questions71: Do both sides get heard respectfully in an argument or disagreement? Can you compromise effectively? Do you feel free to explore your interests with others you work with? Do you feel free to explore your interests on your own? Do you feel comfortable with who pays for what? Do you feel safe when working with your colleagues, donors, board members, volunteers, etc.? Do you feel respected by them? These same questions are also relevant to assess relational equality in your nonprofit.

During the early days of nonprofits in America, relational equality was not a priority value. Boards ruled. The authority structure was very hierarchical and based on wealth or position. CEOs were there at the discretion of and to serve the passions and directions of influential board members. From the inception of the notion of a board of directors or trustees over a century ago, leaders have struggled to achieve relational equality and equity between board and staff.72

In the early days of America, nonprofits were led by boards comprised of wealthy individuals or people of status (often clergy). As the economy grew, boards were led by corporate leaders, lawyers

70 Fourie, et al.’s work on relational equality is worth reading for a deeper understanding of all the ramifications for nonprofits. Fourie, C., Schuppert, F., & Wallimann-Helmer, I. (Eds.). (2015). Social equality: On what it means to be equals. New York, NY: Oxford University Press.71 For example, see http://www.loveisrespect.org/content/equality-in-relationships/ and Alan Fiske reminds us that in our interactions four kinds of exchanges are done with consideration of equality being one of them. See http://www.rmt.ucla.edu/ ; see in particular the ‘Non-technical introduction” link entitled When the dog barks.72 Hall, P.D. (2010). Historical perspectives on nonprofit organizations in the United States. In Renz, D. (Ed.), (2010). The Jossey-Bass handbook of nonprofit leadership and management. San Francisco, CA: Joessey-Bass, Third Edition for discussion on the struggles and changes that occurred as society leaders tried to figure out how best to set up the organizational structure of nonprofits. Be sure to get the Third Edition because it has the latest on factors affecting today’s nonprofits and signals the on-coming challenge of other social enterprises. Different actors, different organizational models, same goals and causes and customers.


and the wealthy. The board ran the organization based on individual negotiation of how nonprofit funds were to be used, much of which they contributed. The principle that when an asset is given to the corporation, it is the corporation’s assets not the giver’s, was not even expressed in law for a while and when it was, it was not followed.

During these times, some board members used the nonprofit to leave personal legacies such as buildings or institutions. But such primary motives created major leadership and administrative problems for paid leadership. There was not a sense of equality between board and executive staff. In some cases, there was also not relational equity between them. Over the years, legal principles of fiduciary management evolved, as mentioned previously, to remind all, irrespective of position, status, wealth, or expertise, that executive leaders’ (board and staff) duty was to pursue the corporation’s interests and not self-interests. Their loyalty, care, and obedience was to the corporation and its interests, not other board members, staff, friends, cronies, or self.

Today many executive paid staff have more autonomy over what and how they lead and manage the organization than in the past. Many board members seek to establish a relationship with the executive staff, as well as others in the organization. Organizational management and leadership practices value shared, consensual decision making, team leadership, delegation of authority and control, and evaluate performance on a richer set of information, and provide time and negotiated conditions to improve performance before dismissal.

Practicing relational equality is more than just focusing on the avoidance of dominating, oppressive or exploitative relations.73 Those are the negative behaviors that create conditions that do not nourish relational equality and equitable treatment. Practicing relational equity must affect positively the ways in which people relate to one another. It’s also about re-shaping attitudes about each other. Most often people talk about relational equality in action as mutual respect and tolerance of each other’s differences. Relational equity is usually discussed as evident when one sees work associates establishing relationships with one another beyond work relations, or when work associates create solidarity of purpose and mission; or when they see work associates willingness to cooperate with each other.

A procedural way relational equity and equality are expressed is offered by Scheffler.74 He suggests a central characteristic of all relationships existing within a political environment such as a nonprofit, is that each person makes decisions in a way that assigns an equally significant role to each person’s needs, values and preferences. What does each want out of the interaction? What must be included in the decision’s content that meets those needs, values and preferences?Practically, deliberations are made based on whether the issues involve actions affecting the internal operations and employees, or whether they affect external players. Several values are considered in making such decisions, including but not limited to the value place on relational equality. One

73 See Anderson, Elizabeth. What is the Point of Equality? P 313. “What is oppression? Anderson defined it as forms of social relationship by which some people dominate, exploit, marginalize, demean, and inflict violence upon others.’74 Scheffler, S. (2003). What is egalitarianism. Philosophy and Public Affairs. Vol. 31, p 5-39. Also see Scheffler, S. (2005). Choice, circumstances and the value of equality. Politics, Philosophy and Economics. Vol. 4, pp. 5-28.


can point to instances where leaders create very relationally equal internal environments, but are ruthless in their treatment of others external to them or that they find threatening, often without the knowledge or sanction of their board. Too much of this goes on in the nonprofit sector! Practicing equality and equity in social situations is indeed complex!

Many authors have tackled the dilemmas involved in distinguishing between acceptable and unacceptable hierarchical relations. It is a bit foolish, impossible and undesirable to eliminate all hierarchical relations in a modern society, including the fact that nonprofit boards of directors are at the top of the hierarchy when viewed from a legal perspective, as well as in some people’s view of management. Inevitably, nonprofits throughout hierarchical relations have positions of political and administrative authority, leaders and followers, and those esteemed more highly than others. It would be foolhardy in many situations not to defer to relevant epistemic authorities. So, the challenge practically is to determine which kinds of hierarchical relations are morally objectionable and which are not and why, how authority is practiced, and what needs to be negotiated to create a more just practice.

The difference between respect and esteem. Respect and esteem for others are two guidelines for determining what hierarchical relations are morally objectionable. Respect in this regard means that leaders recognize certain basic moral capacities in other people affiliated in some way with the organization (e.g. all people are equal principle in practice). Esteem refers the appraisal made by leaders of other people’s choices or of certain other features that do not bear on their moral status (e.g. a person is chosen as a board member because of their expertise). An example of esteem would be individual assessments of an another’s beauty, except in cases where the assessment is used to reduce the worth of the individual in other people’s assessments of that person which violates the respect principle. Another example of esteem would be leaders’ assessment of another’s knowledge and wisdom.

Inequalities in exercising esteem are an inevitable part of social life. Human potential and the concomitant merit to others vary. The ideal of relational equality implies equality of respect but tolerates or even encourages hierarchies of esteem in terms of knowledge, professional achievement, and so on. We reward people for what they have accomplished and for their impact on others. We esteem them and their actions. We respect everyone’s rights to express ideas, claims and to participate in decision making affecting everyone in the organization. We respect all equally in our actions.

Examples of unacceptable relational inequalities are when esteem is accorded for the wrong reasons, when certain units within hierarchies receive certain kinds of institutional backing which causes inequalities, or when they are the result of unequal opportunities for esteem. For example, where women’s only opportunities to gain other’s esteem are in certain roles such as married, mothers, Vice Presidents or below (the ‘glass ceiling effect’), CEO of only small nonprofits, or when the number of dimensions along which people can seek to win others’ esteem is rather limited. Another example would be when family members are employed in a nonprofit and are afforded more esteem than other members.


Coalitions, collaborations, partnerships and relational equality. For the past twenty or more years, major foundation and federal grants have required partnerships resulting partially from a renewed understanding about how social and economic capital are developed. But as Paul Hogan, a foundation CEO, recently reported, most CEOs, senior staff and foundation leaders cringe when they hear coalitions or collaborations.75 Many are collaboration weary as traditionally practiced. In addition, in a very well-done video by the Task Force for Global Health, the 2nd largest nonprofit in the USA according to the Forbes Top 100 Nonprofit list76, leaders discuss the lack of willingness of nonprofits to collaborate to resolve major global health issues. The type of collaboration they are talking about is way beyond what typically is found in most grant applications. They are talking about networked organizations as discussed in the first key practice. President Carter challenges these leaders to partner, collaborate, share resources, develop common missions, strategies, etc.Fundamentally, collaborations, partnerships and coalitions will not work unless relational equality and equity are practiced. Such collaboration requires being honest and open with each other about what each need from the relationship. It requires spending time with each other, apart from working together so that trust is built and each person’s passions for cause and in life are understood. Paul Hogan reminds us all that people interact with people, not organizations with organizations. Coalitions, collaborations, and partnerships are people interacting with people. What matters is who is there and how they interact, and whether the interaction is based on sound principles of equality and equity.

Nonprofit enterprises are “relational and restorative. The bases of activity in a nonprofit enterprise are personal and interactive, and seek to restore or generate whatever people need to improve their lives, or the life of the community in which they live.”77

The customers are not asked to pay the total cost of the services provided. Instead, third parties enter the picture. They are donors, investors, funders and for-profit businesses that share common interests. Thus, nonprofit leaders that are high performers learn to build strong and lasting relationships with these third parties so that customers don’t have to bear the true costs. But someone(s) must pay for them! Without practicing the fundamentals of relational equality and equity, costs won’t be covered and the number of customers served must be limited.

Everyone knows that collaborations and partnerships are better because resources can be shared and applied in greater amount with greater capacity.78 But major world leaders are frustrated

75 For example. See Paul Hogan’s recent article entitled Coalitions of the Nonprofit Willing: Who’s Willing and Why? NPQ. June 26, 2017 as retrieve from https://nonprofitquarterly.org/2017/06/26/coalitions-of-the-willing-whos-willing-and-why/?utm_source=Daily+Newswire&utm_campaign=03d85bc302-EMAIL_CAMPAIGN_2017_06_26&utm_medium=email&utm_term=0_94063a1d17-03d85bc302-12401769 76 See Forbes Top 100 Nonprofit list for 2016 at https://www.forbes.com/top-charities/list/#tab:rank 77 Paul Hogan, see above reference.78 Much was written on this subject in the late 1990s and early 2000 period, resulting in massive social policy changes in foundations and federal and state government guidelines. For those wanting numerous examples of the ways in which organizations are better together see Putnam, R.D., Feldstein, L., & Cohen, D.J. (2003). Better Together: Restoring the American community. New York, N.Y.: Simon & Schuster Paperbacks. Also see Australia’s principles of engagement at http://bettertogether.sa.gov.au/principles-of-engagement . Also see the Suguaro Seminar at https://www.hks.harvard.edu/programs/saguaro/


because so few nonprofits cooperate with each other in meaningful ways to tackle major social and environmental issues. The values behind those nonprofits that strive to collaborate and cooperate with others are expressed nicely by The Taskforce for Global Health in their core values statement and are as follows.

• Collaboration – We believe partnerships are essential. Organizations working together have a much greater impact than they can when working on their own.

• Global Health Equity and Social Justice – We work to provide all people, especially the world’s poor, with opportunities to lead healthy, productive lives.

• Stewardship – We pride ourselves in the wise and judicious management of the resources entrusted to us.

• Consequential Compassion – We link compassion to effective actions by being aware of the suffering of others, understanding the causes of that suffering, and engaging in informed actions to alleviate it.”79

The very nature of nonprofits is inter-relational. The sector relies on third parties to provide the resources necessary for the nonprofit to service its customers without cost or at greatly reduced costs. It is not a zero-sum transaction entity as is true of for-profits.80 Without collaborations and partnerships there is no nonprofit! Yes, such efforts are hard. Some don’t work well because one or more partners don’t practice relational equality and/or equity well. But, nonprofits flourish when they learn to partner and network, and accomplish work collaboratively and cooperatively, and with mutual respect, tolerance of differences, and a willingness to compromise so that everyone’s needs and interests are accommodated.

Performance evaluation and relational equality. One area in which relational equality is practiced by all nonprofit boards is in the evaluation of CEO performance. A recent study indicated that a significant number of nonprofits that did not grow within a five-year period also were more apt to indicate they were dissatisfied with the ways in which their board evaluated them.81 Practicing relational equality principles helps ensure performance evaluation processes and performance criteria are just, fair, known and discussed with those being evaluated. Discussion on performance criteria happens before the performance period under review begins, not after the fact. The criteria are created together (CEO and Board).

Effective evaluation requires a positive relationship between the one evaluated and those evaluating. Evaluations are value judgements made about performance. Values about another are shaped by the

79 As retrieved on 7/2/2017 from the Mission page of the Task Force for Global Health at https://www.taskforce.org/about-us/mission-vision-and-values 80 Zero-sum relationships in the for-profit environment are those that make sure that all transactional costs are passed along to the customer, including some additional amount which is profit.81 Brown, K. (2012). Factors that affect nonprofit directors’ intentions to build capacity. Ann Arbor: ProQuest Publishing.


amount and kinds of interactions we have with each other. They are shaped by the predominant authority sources used to guide the evaluators’ expectations of performance. If workers only interact with their supervisors around work-related issues and only occasionally, the bases used to judge performance is usually less and collected to reinforce what one believes about the other. It’s bound to affect what happens in performance evaluation reviews.

Effective CEO performance evaluation can’t happen, if board members really haven’t understood what the CEO has done and what results and impacts have occurred. If the board has no significant interaction with the CEO except during board meetings and a few occasional phone calls, the CEO and board have little information about each other that they hold in common. Do you know why a board member really agreed to serve? What do they really want to do for the organization? Do you know what the CEO’s passions and concerns are? What do they really envision for the organization? Where to they feel constrained? Involving multiple stakeholders, some of whom know board members and the CEO much better is helpful in getting a better appraisal of performance. Too few boards allow staff a voice in their supervisors’ evaluations so, in some instances, inequities are present, but go unnoticed and unknown to the board. Some supervisor-employee inappropriate actions could be addressed much sooner, if more voice was given to workers. Are the interactions between CEO and employees in your organization viewed positively? Upon what and who do you base your assessment?

The leadership relational dilemma. Under the best of circumstances, fully functioning boards that establish a working relationship based on principles of equality and equity with the CEO lasts but a few years, and then most CEOs are left with a largely dysfunctional board or a board that wants to do what the CEO should be doing, or a board that doesn’t do much of anything but uses a lot of the CEO’s time and energy to manage. Unfortunately, those that have served on other boards have had their expectations shaped so that doing nothing other than attending meetings and readings reports is all that they think is required. Few board members can tell you clearly what they think their fiduciary responsibilities are. The degree of CEO management and leadership autonomy ebbs and flows as the board profile changes. Trust and respect of each other ebbs and flows with changes in board composition. It is easier to establish a good relationship with some and not others. Depending on the board members view of their authority, they may purposely stay distant from the CEO. The sources used by the board to judge performance accountability ebb and flow, are multiple and sometime conflicting. Often, the criteria used to evaluate CEO performance are not articulated. All these factors work against establishing relational equality and equity between board and executive staff.

In 1948 and again stated in 1971, Chester Bernard described nonprofit administration as follows82:

“This is the story of nonprofit administration. . .

• Free and unfree,• Controlling and controlled,• Choosing and being chosen,• Inducing and being unable to resist inducement,

82 Bernard, C. (1971). The function of the executive. Cambridge, MA: Harvard University Press.


• Hoping to dominate the earth and being dominated by the unforeseen,• Nourishing leaders’ personalities or depersonalizing them, • Forming purposes and being forced to change them,• Searching for limitations to make decisions,• Seeking the particular, but concerned about the whole,• Finding leaders, yet denying their leadership.”

In what ways does your nonprofit . . .

• create CEO freedom to exercise his/her talents?• provide Board management mechanisms that are fair and just to the executive staff? • create opportunities for the CEO to choose what is done and how? • give hope by providing fair, just treatment, acknowledging moral equality, and primarily

assessing performance based on the result and impact of the staff’s labors? • involve CEOs and significant numbers of internal and external stakeholders in purposing and

re-purposing the organization to adapt to changing circumstances and client profiles? • engage CEOs in decision making without excessive limitations or exclusions?• help employees see the whole of the organization and how they can accomplish their job in

light of the outcomes they have had a part in articulating?• provide opportunities for leaders to emerge, be nourished, and lead?• provide clear, mutually developed criteria by which the CEO and other staff are evaluated?• provide freedom for leaders to lead in ways that do no harm?• secure executives that are proven leaders and growth producers?• reduce board functions to those needed to provide expertise to the CEO and organizational

viability, sustainability, and growth, and primary focus on performing their fiduciary responsibilities (duties of care, loyalty, and obedience)?

At the heart of relational equality is a sense of social justice. What is needed to constitute a just relational environment within your nonprofit? What does a system of fair cooperation among free and equal people look like? Are people in your organization, including the board and funders, committed to the idea of social cooperation? Are leaders committed to cooperation with other organizations? If not, what’s standing in the way?

Some nonprofits create value statements that guide prized conduct and valued relational interactions among all who affiliate with the organization. While it is acknowledged that value statements of relational interaction may be different from what is present, they do offer an opportunity to discuss what they expect would be done, if such values were operational in their organization. Appendix A, identifies the core values expressed by the top five largest nonprofits in the USA. Many directly feature one or more of the principles of equality and equity discussed in this guideline.


Real and formal freedom

Formal freedom is what a group can do and not do as found in organizational policies, and state and federal laws. Real freedom is what a nonprofit takes control of and does, sometimes irrespective of other group’s opinions or rules of the road. Other’s sense of ethical claims doesn’t impede the nonprofit’s sense of what is done to grow. For example, if a state’s nonprofit law says that there must be a chair (President), secretary and treasurer appointed as officers of the board, the nonprofit must comply. The nonprofit may choose to have other officers, but formally they are free to not have additional officers. Another example is when the state nonprofit law doesn’t indicate committees are required, the nonprofit is free to not have committees, if it so chooses.

Sometimes, the board and staff are influenced by external stakeholders, such as views promoted by certain national and regional nonprofit leaders. Sometimes, suggestions are viewed as laws. So, while a nonprofit may be formally free to structure themselves or do certain things, they treat a suggestion as a law and are not free. Sorting out what is a nonprofit’s formal freedoms versus what are other perspectives or advice that inhibit effective practices is a major challenge to all nonprofit executives, board and staff alike.83

Some of the criticism NANOE has received when it issued its first draft of guidelines was regarding board size. NANOE suggested a lean board made up of specific types of individuals based on their capabilities and who can form a valued advisory, counseling relationship with the CEO, while fulfilling their primary fiduciary duties of care, loyalty, and obedience. The number NANOE mentioned was six individuals, each with specific expertise and experience in specific areas of nonprofit organizational life.84 NANOE was clear that all readers should consult their state’s nonprofit law to make sure they complied to the minimum requirement set forth in their state’s law

83 For example, the Michigan Nonprofit Association was a national leader in helping board’s sense their freedom when they went through their standards booklet and starred all standards that were based on legal requirements. What is required by law in far less than the listing of ‘standards’ presented. Some other states followed Michigan’s lead and did the same. Others have not. Nonprofit leaders who use the standards booklets with their boards and staff are encouraged to go through their state’s nonprofit law and star those practices in the standards booklets that are legal standards so the booklet is helpful to nonprofit leaders to know what the latitude and nature of their freedoms are. 84 See NANOE’s booklet entitled Growth by structuring leadership roles and responsibilities in networked nonprofits in NANOE’s Growth Series, available free of charge to NANOE members. Also, each state determines the governance structure required of its nonprofits. It is found in your state’s nonprofit incorporation law. Standards issued by various groups require many more but that should not be your guiding document. Consult your state’s law for the minimum directors required. NANOE recommends that the nonprofit have enough board members to allow for full deliberation and diversity of thinking on governance and other organizational matters. The diversity recommended is determined by expertise: NANOE recommends finding someone a) knowledgeable about enterprise development, b) knowledgeable of proven interventions and evaluation related to cause and organizational development; c) someone competent in nonprofit accounting and auditing or knowledgeable about nonprofit financial growth and management; d) one knowledgeable on nonprofit law, particularly related to cause; and e) one experienced and knowledgeable about state-of-the-art nonprofit leadership and administration. See Hopkins, B. R., & Gross, V. C. (2010). The legal framework of the nonprofit sector in the United States, in Renz, D. (Ed.). (2010). Jossy-Bass handbook on nonprofit leadership and management. San Francisco, CA: Jossy-Bass, Third Edition, pp. 42-76.


relative to board size. Some critics complained we were violating an ability to have diversity (i.e. a claim of the violation of the equity principle), and to create an organization that was democratic and just. They claimed that NANOE’s guideline violated their advice to have more board members and more responsibilities assigned to the board. However, readers are reminded that sometimes claims by others are not the formal freedoms you actually have. There is no known state law or federal law requiring more than five members on a board85. Some require only three: chair, secretary, treasurer. Legally, the primary responsibilities of the board are focused on upholding the state’s nonprofit law, the nationally-recognized legal principles of duty of care, loyalty, and obedience as discussed earlier, and adhering to current IRS regulations.State laws uphold the notion that boards must act to protect the corporation’s interests and not their own. There are very few guidelines in law that say what, beyond the fiduciary responsibility of the board, that the board must do or oversee. In other words, state and federal laws provide a great deal of freedom to nonprofits to organize themselves and conduct their work in a variety of different ways.

Watch leaders don’t box the board or executives into structures, roles and responsibilities that are not based on law. Keep your freedoms where you can! Most laws are set up to give maximum freedom to adapt to changing times and circumstances. Advocate for changes in laws, when you see laws aren’t keeping up with the times and changing circumstances.

Look carefully at people’s ethical or accountability claims. Are they based on formal freedoms and restrictions, or are they someone’s claim of moral or ethical behavior? Both need to be respected and carefully considered, but be careful about what limitations you place on the organization when by law you are given the freedom to conduct business and relationships in the way that best reaches outcomes in equitable ways, protects the corporation’s assets, and upholds the duty of care, loyalty, and obedience relative to the corporation’s interests.

85 See Hopkins, B. R., & Gross, V. C. (2010). The legal framework of the nonprofit sector in the United States, in Renz, D. (Ed.). (2010). Jossy-Bass handbook on nonprofit leadership and management. San Francisco, CA: Jossy-Bass, Third Edition, pp. 42-76.


Equality, Equity and Establishing Roles and Responsibilities

Treating all people affiliated with the organization as having certain basic moral status which is to be respected and protected does not mean there are no authority relationships or that people are not assigned differing roles and responsibilities.86 By law, the board is recognized as the fiduciary overseer as discussed above. The issue is how this authority is executed.

In networked organizations, how management authority and control are exercised much determines whether the partnership or joint venture continues or falls apart. In networked nonprofits, there are multiple boards and executives who agree to work together on a common mission, goals, strategies, and outcomes. Various entities and people’s roles and responsibilities must be openly discussed and, from time to time, a more comfortable balance of power and control sought. In such entities, management authority is usually talked about as shared authority. Each gives up its rights to total control and having things go exactly the way they want them to go. The impact investment literature talks about leaders being courageous leaders87. Some of the examples of high performing large nonprofits had supportive, functional boards, and others did not. It takes courage to tell staff and one or more of the boards in networked organizations that the good they are doing can be better. It takes courage to move ahead even when the board(s) just doesn’t get it. It takes courage for unit leaders (i.e. one entity among many) to assess the conditions and people under their unit’s leadership and realize that the status quo promoted by headquarters and other units is not solving certain problems, only servicing them (or ignoring them).

One unit (a ‘territory’) of the Salvation Army faced such a situation. Some 4-H leaders had the courage to forge a new program area (STEMS initiative) in an organization, the Cooperative Extension System, that had decades of traditional programs as well as constant changes in program emphasis every four or eight years when the federal government administration changed. But they persisted. They didn’t try to change the authority and governance structures around them88, but they were in a system with enough freedom to do and try new things. They were allowed yearly to present their work plans. The 4-H specialists were tasked within that system to innovate, research and report results. So, while the authority structure didn’t change, there were basic freedoms in their workplace to pursue new innovations, as long as they evaluated outcomes and impacts, and reported results. The YMCA is another example of strong leaders moving ahead without major changes in governance.

86 See a series of case examples of equality in action at https://www.equalityhumanrights.com/en/secondary-education-resources/useful-information/equality-case-studies 87 For example, see Campbell, K., Virani, S. & Lanney, J. (2016). Network transformations: Can big nonprofits achieve big results? Stanford Social Innovation Review, March, as retrieved at https://www.bridgespan.org/insights/initiatives/transformative-scale/network-transformation-can-big-nonprofits-achieve for details on the 4-H, Save the Children, the Y, and Salvation Army cases. 88 They didn’t try to change the university departments they work through, or the local CES offices at the land grant university, or federal CES system and its governance located in the US Department of Agriculture.


Save the Children, on the other hand, determined that their governance structure (comprised of multiple boards of directors in various nations) would have to go through major changes after they assessed that there was lack of coordination among units (entities with boards) within their networked organizational system. All these various units had boards of directors. Some were in other countries under different national regulations. To achieve greater coordination, the governance structures had to be streamlined. Some boards had to go and the organization needed re-structuring. It took strong leaders to accomplish this governance structural change, along with solid data to back up claims and show current outcomes and impacts, or lack thereof.

In the traditional nonprofit governance model, the executive director actually acts more as the program and operations director to carry out the plans created by the board. In many ways, the model is like the “old” program model where the client was viewed as being deficit and the party being ‘helped’. The client was treated as someone who didn’t know and couldn’t help themselves or others. The client was robbed of key decision-making ability without checking in with the service provider. It was a deficit-based model of human interaction. Practicing equality and equity principles operate as an asset-based model.

When funders are added to the authority and control mix, some of them also tend not to trust the board or CEO, and set up additional authority, control, and oversight processes. All these layers of management authority and control create very challenging leadership environments for nonprofit CEOs. It’s time to consider re-structing the way we operate and re-consider the way in which authority and control are exercised. Networked nonprofits that have grown have done just that. Given the traditions in the nonprofit sector, no wonder so many millennials and GenXers will never consider working within a nonprofit environment, or are committed to mission-driven work, but not necessarily to the nonprofit sector! No wonder so many of them question CEO-board roles and responsibilities as traditionally defined and want flatter, more nimble organizations that don’t inhibit collaboration and isolate decision making!89

The CEO is many times caught between multiple entities all trying to exercise management control and exert their authority over what is done and how in the nonprofit. Sometimes the direction from one contradicts or is dissonant with the other! The board, individual donors, government and private foundation funder(s) all have their say. Each in a variety of ways maneuvers to control the use of their contributions, many times way beyond the terms of contracts, grants, or the stated formal freedoms that a nonprofit is afforded. If we start from a premise that all leaders, donors, funders, other contributors, and for-profit partners are of equal moral status and should be treated fairly and justly, the relationships among them should therefore promote opportunity, participation, functional capacity, and relational equality and equity.

89 For example, see the report issued by the Young Nonprofit Professionals Network’s report entitled. Good in theory, problems in practice at https://d3n8a8pro7vhmx.cloudfront.net/ynpn/pages/302/attachments/original/1434746810/Good_in_Theorty_Problem_in_Practice_FULL_REPORT.pdf?1434746810



KEY PRACTICE NO. 3BUILD ENGAGED RELATIONSHIPS


KEY PRACTICE NO. 3BUILD ENGAGED RELATIONSHIPS

Cooperative action is based on efforts to create a durable, pervasive relationship that permits those involved to achieve mutually beneficial results. Cooperative action is possible when people and organizations engage each other in meaningful ways. Each must be able to communicate what they need from the relationship, what they can and can’t do, how and around what they want to be involved, and how the relationship is advertised to others. Communications must be established based on respect, considering each as their equals, and the ability to voice passions and concerns.90

We know that when communities are strong, residents are civically engaged.91 Civic involvement is participation in activities that directly or indirectly contribute to a community’s (or organization’s) overall wellbeing. Actions often associated with civic involvement include voting, being an active member in a club, and volunteering with a nonprofit, as well as neighbor helping neighbor. When residents form a civic consciousness, their activities are more altruistic and more often take into account the common good.92 These findings are as true for nonprofits, when viewed as a community, as they are for any other type of community.

As engagement with others in the nonprofit grows, each recognizes they are a member of a larger social fabric. They consider the social or environmental problems related to the nonprofit’s cause to be at least partly his/her own. They are willing to see the moral, structural and procedural dimensions of issues, how they fit into situations that cause the issues, and their role in their alleviation or eradication. They make and justify informed moral and civic judgments, and act together.93

Most of the examples of big bet philanthropy are with networked organizations who commit to engaging with other organizations (government, nonprofits, businesses) to expand their evidence-based services to many more customers. They must be willing to engage with the foundation staff, with the leaders of the networked organizations and participate in building their own organizational

90 For example, Robert’s Rules of Order used by so many boards limit the time for communication and are premised on rules to control communication. Often, the board (one stakeholder group) is viewed as having more conversational rights in discussion of matters that affect other stakeholders. Often, other stakeholders are denied opportunity to speak entirely or in such a shorten form as to create animosity and disrespect. Roberts Rules of Order do not foster building enduring, trusted communicative relationships. Those using such procedures have usually not done their job in providing opportunities for multiple perspectives to be heard, such as holding community forums, town halls, etc.91 Robinson, K. (2002). Building civic literacy. Clemson, SC: Institute on Family and Neighborhood Life. The entire field of community psychology has researched civic engagement. The research literature is plentiful in this regard.92 Taylor, M (1982). Community, anarchy, and community. London: Cambridge University Press; Coleman, J.S., & Hoffer, T. (1987). Public and private schools: Impact of communities. Basic Books. See, for example, Keltner, D., Marsh, J., & Smith, J.A. (Eds.). (2010). The compassionate instinct: The science of human goodness. W.W. Norton & Company. 93 Ehrlich, T. (2000). Civic Responsibility and Higher Education. Oryx Press.


capacity. This is the type of engagement we’re talking about here. It’s long-term, it’s not easy, it takes considerable work, it stretches everyone’s thinking, practices, and administrative competencies!

For nonprofits to grow, engagement must be more than causal, short-term, and nonbinding. They work together with other organizations on common issues and goals. They seek common outcomes and impacts. They share resources, engage in joint programming, consolidate administrative or programming functions/staff/resources, share clients, share governance, and eliminate duplicative costs to achieve economies of scale. Current examples of such engagement are growing very quickly. For example, the Edna McConnel Clark Foundation has become what is known in the capital development literature as a ‘capital aggregator’.94 They have sought other funding partners95 that have similar passions to alleviate certain social issues and have amassed millions of dollars to heavily fund a few nonprofits that already show evidence of going to scale and are willing to build certain additional levels and/or kinds of capacity. The Youth Villages, the Nurse-Family Partnership, Wendy’s Wonderful Kids, Year Up, Healthy Steps, Upstream USA, and Harlem’s Children Zones are each receiving millions to take their services to scale. Each must develop a comprehensive scaling plan, done in phases. Each receives additional capacity building, as well as seeking to scale services and organizational structure and operations. A great deal of engagement is required from everyone involved.

Another aspect of engagement must be mentioned. Board members need to be engaged in their duties or get off the board.96 Either they actively perform their responsibilities and are of value to the executive staff and organization, or they aren’t. If they aren’t, they need to be removed. Being a board member is more than a title or something that one uses as currency to promote their own self-esteem or self-interests.97

It’s time we stop saying too many boards are disengaged and deal with the issues. Strategies may include reducing the size of the board, reducing the responsibilities of the board, providing more information on outcomes and impacts, creating a dashboard monitoring system, and/or adding a board performance evaluation system. Do you have a disengaged board? What might be changed to try to seek engagement? What roles and responsibilities are board members given? Do they fit their reasons for being on the board and use their talents properly? What kinds of people would really be most helpful to the CEO and help build and maintain key capacity areas of the organization?

94 See Edna McConnell Clark Foundations page on capital aggregation at http://www.emcf.org/capital-aggregation/ as retrieved on 7/3/2017.95 These partners are called Blue Meridian Partners. See http://www.emcf.org/our-strategies/blue-meridian-partners/ 96 Hopkins and Gross suggest that board members who don’t go to meetings are not practicing their fiduciary responsibility related to the duty of care. See Hopkins, B. R., & Gross, V. C. (2010). The legal framework of the nonprofit sector in the United States, in Renz, D. (Ed.). (2010). Jossy-Bass handbook on nonprofit leadership and management. San Francisco, CA: Jossy-Bass, Third Edition, pp. 42-76.97 Be leery of a person who says they are on more than two boards. They should be asked immediately how active and engaged they are on each board. Many say that if they are engaged and still working full time, they can’t possibly be of much value if on three or more boards. And there is also concerns of conflicts of interest (i.e. a possible breach of the director’s fiduciary duty of loyalty).



KEY PRACTICE NO. 4BUILD RECIPROCAL RELATIONSHIPS


KEY PRACTICE NO. 4BUILD RECIPROCAL RELATIONSHIPS

Building reciprocal relationships involves our communicative behaviors, as well as the things we give each other. On a personal level, we understand this concept the best by the adages “what goes around, comes around” or “what you give out, you’ll get in return” or “do to other as you would want them to do to you”. Reciprocal relationships can be punitive and secretive, or nurturing and open.

Relationships that are reciprocal are built on understandings of mutual respect, dependence, action and influence. Respect is based on a recognition of each person’s moral status and not what they personally feel about an individual. While each’s moral status is the same, often reciprocity is practiced between people with unequal resources, position, and status. People give to each other and receive things from each other in mutually satisfactory ways. The word “receive” is used rather than “take from” because reciprocity is an act that comes from the heart, is not required, and many times not even requested or expected. Reciprocity is based on the internalized belief that one should do to others what they would want done to them.98

Reciprocal actions differ from altruistic actions. Reciprocal actions follow from other’s initial actions. It results from social exchanges. Altruism, on the other hand, is the act of social gift giving without hope or expectation of future positive responses.99 It is an internal response based on one’s moral values and beliefs. Altruism deals more with what one must muster within themselves relative to others and how they choose to live in this world. Reciprocity, on the other hand, happens in a social exchange. It takes two (or more) to practice and receive reciprocity. Depending on what goes on in the exchange will influence whether reciprocity is practiced initially and whether it’s continued. Both altruistic and reciprocal relationships are needed to build strong relationships among leaders in the nonprofit sector. It takes active interaction and thought, not passivity to practice both.

Building a norm of reciprocity in the nonprofit sector will take new kinds of attitudes and actions (i.e. new primary drivers of attitudes and actions) on the part of executive, board members, donors, government and foundation funders, for-business partners, as well as sector leaders.100 Building

98 See Matthew 7:12 and Luke 3:31, also known as the Golden Rule; Muslim tradition has a similar law “whatever is hurtful to you, do not do to others”; several other religions also have similar guidelines.99 Batson, C. D., Duncan, B., Ackerman, P., Buckley, T., & Birch, K. (1981). “Is empathetic emotion a source of altruistic motivation?”. Journal of Personality and Social Psychology, 40, 290-302. Cialdini, R. B., Schaller, M., Houlihan, D., Arps, K., & Fultz, J. (1987). Empathy-based helping: Is it selflessly or selfishly motivated? Journal of Personality and Social Psychology, 52(4), 749-758.100 Caliendo, Marco; Fossen, Frank; Kritikos, Alexander (2012-04-01). “Trust, positive reciprocity, and negative reciprocity: Do these traits impact entrepreneurial dynamics?”. Journal of Economic Psychology. Personality and Entrepreneurship 33 (2): 394–409.


reciprocal relationships is easier with those who are a part of our bonding social networks and are more difficult with those from bridging networks. Trust must be built. Understanding each’s needs takes time and ample, effective communication. Understanding each’s passions relative to cause and the preferred ways to ensure eradication of the issues takes time.

Why are you giving? Why are you serving a nonprofit? Why are you volunteering? Why are you leading the organization? What do you get from your association with each other? What do you want to get from your association with the people in the organization? Who is getting and not giving in return? Can you establish more reciprocal relations with various individuals in the organization? How is reciprocity practiced by your customers? Are there acts of reciprocity back to them beyond what is required in service delivery?

Socially justified conditions for nonprofit existence. The notion of reciprocity cuts at the very heart of the conditions under which any organization’s existence is seen as legitimate by others. Most understand that organizations are socially justified under certain conditions. Three basic conditions are:

1) People stay out of each other’s way enough so that each can pursue his or her individual interests as far as possible, without interference from others, doing harm, or conflicting with the stated purposes of the corporation. Rules imposed on each other must be mutually advantageous. Requiring obedience from people when some will be disadvantaged by following the rules creates an unequal situation. When some can get away with disobeying rules the situation becomes unworkable. The challenge is to create a working environment in which it is mutually advantageous to follow the rules even when it is inconvenient or costly to do so. All human organizations have rules (policies, laws, employee handbooks, etc.). The point is to establish rules that foster reciprocity, honor moral status, and foster effective relationships, clear expectations, and freedom to pursue mutually beneficial paths aimed at mutually agreed upon goals that best serve the corporation’s interests.

2) The second legitimate reason for the existence of a nonprofit organization, or any organization, is that people organize themselves into groups in order to achieve levels of cooperation needed to improve society generally and which are impossible at the individual level. For example, groups are formed to improve public health, provide all residents with an education, opportunities to gain employment, wealth and individual welfare. We need organizations beyond what is possible through individual helping others that promote cooperation among people to improve their communities and its residents. A nonprofit in a community is legitimate to the extent it engages in cooperative efforts to alleviate the communities social or environmental issues, and promote well-being and a sustainable environment.


3) A nonprofits legitimacy is also determined on whether it effectively uses its management authority and control over those affiliated with the organization and its customers. All human organizations exercise authority and control. They exert power to influence behavior, values and beliefs, sometimes more than they recognize. Individuals affiliated with these organizations are subjected to the power plays of others internal to the organization and external to them but somehow affecting them. Leadership roles have implicit as well as explicit power, authority and control. The nonprofit organization is no exception.

From the beginning of the USA, community leaders struggled with how to limit individual excessive authority and control over the nonprofit. The courts settled it by ruling that neither the wealthy, or the state, or businesses owned the nonprofit and did not have the legal power to say how the organization should use its resources. Once given to the organization, the funds given were the organization’s property and no longer were the contributor’s or the governments. Nonprofits are accountable to the will of the people and ‘the people’, pragmatically defined, were those affiliated in some way with the nonprofit. It is people who voice their passion for your cause and if the nonprofit isn’t doing what they think it should, they will actively let you and others know!

The legal authority for the nonprofit was invested by the courts in a board of trustees or directors of the corporation. Before the law, they are the legitimate, legal entity that oversees proper use and growth of the property of the corporation (i.e. all assets as well as all debts). Furthermore, it is not an individual board member that ensures corporation assets are managed in keeping with its mission, but rather it is the board’s collective responsibility. This corporate entity is to ensure that all assets are used for the corporation’s purposes not individual purposes (‘self-interests’).

However, all people have self-interests and also represent the interests of others. It is through open communication with each other that nonprofits learn what those interests are, how to accommodate them satisfactorily, when personal and corporate interests conflict, and whether a workable relationship is possible or conflicting with the corporation’s purposes. A nonprofit’s continued legitimacy rests on various stakeholders continuing assessments that its leaders and staff are using their power, authority and control over people and corporation assets in legal, fair and just ways to accomplish its stated mission.

Sometimes individuals sacrifice their own welfare for the good of others— especially when some individuals might not share the particular goals for improvements at issue or when unrealistic service obligations require employees to work long hours, well beyond that for which what they are paid. The value of reciprocal, engaged, equitable relationships in which each’s moral status is considered the same is that these qualities of relationship limit the legitimacy of the sacrifices an organization might require. For one thing, it seems perverse to require sacrifices in pursuit of some social goals, if it turns out those sacrifices were unnecessary, or in vain because the goals can’t be achieved or didn’t produce significant positive outcomes.101

101 For example, some think that the current delineation of board responsibilities is unrealistic, burdensome and misuses the limited time a board member is able to give to the organization, and duplicates what many staff members should be leading, including the CEO.


Current nonprofit structures and processes must be continuously examined considering changing times, new technology, changes in customers and advances in knowledge and practice. What rules and procedures in your organization are unnecessary, have been impossible to sustain, or were not ever established at all or consistently? This guideline addresses some of the areas to examine and suggests ways to organize people, and lead and administer operations that restore fair and just play. Organizational justice based on reciprocity, fairness, extending freedoms, and just actions is an attractive middle ground between a thoroughgoing concern with individual well-being and a thoroughgoing concern with social well-being.102

Some say that the human intuition that powers social media today is reciprocity. It isn’t the tool but the motivations that are evoked that gives social media its power and value. People want community. People want efficiency in the way they get and share information.103 People want to share things. It can be hate or it can be words for each other’s edification. It depends on one’s habits of the heart.104

“People inherently want to do business with people (and companies) that they enjoy doing business with. If you’re going to spend the vast majority of your time at work, don’t you want to spend that time with people you connect with? Same goes for consumers. They want to buy products and services from companies that they connect with – companies that value their customers and show it. Social media empowers brands to connect with their customers in a scalable, yet personal way.”105

The nonprofit sector needs to learn from the social media movement. They need to learn to connect in new ways and show it!

Reciprocal relationships not only have instrumental value106 (benefits received by each) but also communicative value. They help reduce the uncertainty each feels towards the other’s intentions and builds predictability and trustworthiness of each’s actions towards the other. Reciprocal acts also help build regard and respect for each other and their acts towards each other. It builds solidarity.107

102 See Kelly, E. (2001). Justice as Fairness: A restatement. Cambridge, Massachusetts: Belknap Press. Rawls, J. (1999). The law of peoples which includes a second essay entitled The idea of public reason revisited. Cambridge, Massachusetts: Harvard University Press. And Rawls, John. (1971). A theory of justice. Cambridge, Massachusetts: Belknap Press of Harvard University Press.103 For example, see http://reciprocitytheory.com/2011/08/17/practice-social-reciprocity-not-social-media/ 104 Bellah, R., Madsen, R., Sullivan, W.M., Swidler, A., & Tipton, S.M. (2007). Habits of the heart: Individualism and commitment in American life. Oakland, CA: University of California Press.105 http://reciprocitytheory.com/2011/08/17/practice-social-reciprocity-not-social-media/ 106 Bourdieu, P. (1985). The forms of capital. In Richardson, J.G. (1985). Handbook of theory and research for the sociology of education. New York: Greenwood. pp. 241–58; Portes, A. (1998). Social capital: Its origins and applications in modern sociology. Annual review of sociology 24:1–24; and Coleman, J. S. (1988). Social capital in the creation of human capital. American journal of sociology 94: S95–S120. 107 Molm, L. D., Schaefer, D. R., & Collett, J. L. (2007). The value of reciprocity. Social psychology quarterly, Vol. 70, No. 2, 199-217.


Three important conditions are present when relationships are reciprocal. First, it takes time to develop reciprocity.108 Second, the giver isn’t in a situation where they are certain or even expects they will receive anything. There often are no terms discussed regarding what was given. There are no deadlines given for the receiver to give back. Third, the giver gives voluntarily. Whether, when, and to what extent an actor reciprocates is left to the discretion of the actor.109 While not all reciprocal relationships meet all three conditions, when these are present, both the instrumental and communicative value of a reciprocal act are higher. In what ways are your board/CEO acts reciprocal? In what ways are board, CEO, donor, government and foundation funders, for-profit business partner acts reciprocal? How might they be improved?

108 Molm, L. D., & Cook, K.S. (1995). Social exchange and exchange networks. In Cook, K., Fine, G.A., & House, J.S. Ed. (1995). Sociological perspectives on social psychology, Boston: Allyn and Bacon; and Cook, K. S. (2005). Networks, norms, and trust: The social psychology of social capital. Social psychology quarterly. 68:4–14; Cook, K. S., & O’Brien, J. Psychology of social capital. Social psychology quarterly 68:4–14; Cook, K. S., O’Brien, J., & Peter Kollock. P. (1990). Exchange theory: A blueprint for structure and process. in Ritzer, G. Ed. (1990). Frontiers of social theory. New York: Columbia University Press, pp. 158–81. 109 Larson, A. (1992). Network dyads in entrepreneurial settings: A study of the governance of exchange relationships. Administrative science quarterly 37:76–104; Kranton, R. E. (1996). Reciprocal exchange: A self- sustaining system. The American economic review, 86, 830–51; Offer, A. (1997). Between the gift and the market: The economy of regard.” Economic history review, 3, 450–76.


KEY PRACTICE NO. 5BUILD RELATIONSHIPS

USING HOT & THINK


KEY PRACTICE NO. 5BUILD RELATIONSHIPS USING HOT & THINK

High performing nonprofits have very effective communication systems and behaviors. Among the qualities most often mentioned are: honest, open, and two-way communication, and leaders asking themselves key questions about what they are about to say or need to say to internal and external stakeholders. To build trust, respect, reciprocity, cooperation, high productivity and innovation, an effective communication strategy is required. And it is certainly different from what some of today’s politicians are using and what has become the ‘in your face, say anything you want to say’ normative culture.

Use HOT communication.

Dan Oswald110, a lawyer working with many kinds of businesses, advocates for HOT communication to build respect, trust, inclusion, cooperation, reciprocity, and productivity in the workplace. Three things were found in organizations that had positive social environments with which he worked. Leaders and staff communication was honest, open, and each listened to the other, as well as talked to each other (two-way communication). These three things are premised on leaders and employees valuing each other (their moral status) and treating each other with respect (equity). Valuing others and respecting them are behaviors that can be built or torn down, depending on how leaders communicate. Leaders set the nonprofit’s social and communicative tone.

Honest communication: Lincoln reminded his audience that ‘it is true that you may fool all the people some of the time; you can even fool some of the people all the time; but you can’t fool all of the people all of the time”.111 People will know if you’re not truthful or live by deceit. In the workplace, some leaders may oversell organizational changes and then when the hype doesn’t materialize, or the story changes, the CEOs credibility is lessened. They may begin to wonder what can be trusted as the truth to what is said. Respect is lessened. They begin to wonder, if the leader doesn’t respect them enough to be honest with them upfront, what else is false that the leader said to them. The same goes with over-selling the organizations human relations, services, outcomes and impacts.

Edward R. Murrow perhaps summed it up the best when he said, ‘to be persuasive, we must be believable; to be believable, we must be credible; to be credible, we must be truthful.’112 High performing organizations do practice honest communication. They honestly report performance,

110 Oswald, D. (2010). Make your communication HOT. The Oswald Letter: Insights on business and leadership. As retrieved from http://blogs.hrhero.com/oswaldletters/2010/11/05/honest-open-2-two-way-communication/ 111 Said by Abraham Lincoln on 28 September 1858 during the Lincoln-Douglas debate in Clinton, Illinois.112 from 101 inspiring quotes about communication as retrieved at http://blogs.hrhero.com/oswaldletters/2010/11/05/honest-open-2-two-way-communication/


outcomes and impacts to everyone. If things aren’t going the way planned and tough decision have to be made, leaders don’t sugar coat what they say about it. But it’s not a blaming game!

“Power is actualized only when word and deed have not parted company.” --Hannah Arendt113

Open communication. During times of organizational change, budget strains, staff cut backs or expansion—just about any situation in which resources allocations change and employees sense that they need to be a part of the discussion and know what’s really going on, rumors of how anticipated changes will affect them will flow quickly through an organization and to an interested public. People do have networks in and outside the organization through which they communicate and seek support and counsel. Effective leaders communicate openly, treat all people like adults and share information with them. They don’t isolate themselves from those affected, thereby fostering rumors. They get important information about the change to all people in the organization affected as quickly as possible. They give time for people to ask questions and understand the situation. They listen as well as talk.

Adam Powick expressed the need to keep in constant dialogue with all stakeholders in the following way: “leaders need to give real clarity on a regular basis rather than just a bust of news, good or bad’.114 Sometimes CEOs guard information because they don’t want other organizations, donors, customers, or some staff to know about it. For example, withholding from the board and staff that services aren’t producing the outcomes and impacts that make a difference. Or when there appears to be a budget shortfall and staff and/or programmatic adjustments must occur. Or when a major human or public relations issue happens and they don’t want it to get out any farther than they think it has already spread. Yet, employees and the interested public will and do talk to each other. Effective leaders trust employees with information about issues and changes that are occurring. Yes, some affiliated with the organization will talk to others that may not be in the organization’s best interests, but more than likely some version of the information you share will be out there anyway. Best people feel ‘in the know’ and that all are in the know at the same time so that false spins on what they think is going on don’t explode. Letting all know quickly stops or affects the rumor mill.Certainly, there is some information that can’t be given until its safe or legal to do so, and sometimes on legally sensitive matters, leaders must be cautious about what can be said, but many changes and issues that develop in the work place can be discussed. When there is open communication, it is another signal to employees and the board that you trust them.

How hard is it to find out in your organization what’s going on, what changes are occurring, what the budget is for next year, what’s working and not working? Do you tell all stakeholders the nonprofit’s outcomes and impacts in relationship to the mission and its vision? Or do you just report inputs and process information (e.g. numbers served, workshops held, etc.), but avoid the so what? Do you go to people to discuss concerns, questions or do you send a blasting email or

113 As retrieved from wiseoldsayings.com114 from 101 inspiring quotes about communication as retrieved at http://blogs.hrhero.com/oswaldletters/2010/11/05/honest-open-2-two-way-communication/


tell others about it first (i.e. the third-party grievance approach)? Do you seek to include people who will be affected by decisions made in the decision-making process, and inform all who are affected about what was decided and why? Do you hold open forums where all affiliated with the organization can come and ask any questions they want or discuss anything they feel is important? What limits do leaders place on the way in which people can communicate with each other? What are those limitations fostering relative to respect, trust, empowerment, and collective work?

Two-way communication. Effective leaders listen as well as talk. They know that they have insight and information that employees want, but also understand the importance of hearing the insights and information that employees, customers, the board, the interest public have. “Deep listening is miraculous for both listener and speaker. When someone receives us with open-hearted, non-judging, intensely interested listening, our spirits expand.”115

Some CEOs become too accustom to issuing proclamations and wanting to control human interactions. But when a CEO becomes a ‘control freak’, he/she tends to limit two-way communication, and opportunities when employees and customers can voice their concerns, ask their questions, provide their views on a situation, and offer innovative solutions. They also tend to use each employee to inform on other employees which builds distrust pitting people against people.

Many of the mediation situations some NANOE’s leaders have facilitated are situations in which the CEOs/executive director’s attempts to control human interaction and information flow became so oppressive that open rebellion resulted. Many times, the board was the last to know about it because there was no real mechanism for staff to evaluate leader performance. Some of the mediated incidents ended in the board firing the CEO. Some leaders tried to control human communication so much that it ended up being cases of discrimination. Not sharing information relevant to people’s jobs and organizational changes, and trying to control when and where employees can talk with one another are two management control strategies that tend to backfire.

Making pronouncements, and then quickly exiting a meeting doesn’t work. Leaders are usually better off if they are in meetings and engage in two-way conversations about concerns, questions, and resolutions. People will come to their own conclusions about what is happening anyway. Sometimes collective ‘imaginations’ can result in making up situations and issues that are worse than the truth about what is happening or likely to happen.

Being open and honest requires leaders engage in two-way communication. They listen as well as speak. They don’t over-talk others (even though that is the communicative model found on some news and talk shows!). When two-way communication is present, it builds respect and trust. It can reduce workplace stress. It models the leaders’ beliefs and behaviors about equity and equality in action. Tony Robbins reminds us that ‘the way we communicate with others and with ourselves ultimately determines the quality of our lives.” HOT communication is a main ingredient to building successful relationships with employees, customers, funders, donors, and the interest public.

115 Sue Patton Thoele as found from 101 inspiring quotes about communication as retrieved at http://blogs.hrhero.com/oswaldletters/2010/11/05/honest-open-2-two-way-communication/


Before communicating, THINK!

Mother Theresa reminds us that “kind words can be short and easy to speak, but their echoes are truly endless.”116 In 2010, over 70% of people left their jobs because of the way they were led.117 A 2015 Gallup polls found 50% quit because of their boss.118 While the numbers have gone down since 2010, there is still a very high percentage of workers that leave because of the behaviors of their immediate supervisors. Leaders set the relational tone.

Florida State researchers found the top reasons why employees left their jobs was the following: 39% said their supervisors failed to keep their promises; 37% supervisors failed to give credit where credit was due; 31% supervisors gave them the ‘silent treatment’ in the past year; 27% supervisors made negative comments about them to other managers or employees; 24% said the leader invaded their privacy; and 23% said leaders blamed others to cover up their own mistakes or to minimize embarrassment.119

Want to inspire creativity, respect, trust, and cooperation? If so, before you speak, THINK.120

T = Is it true? H =Is it helpful? I = Is it inspiring? N= Is it necessary? K = Is it kind?

As Mardy Grothe so eloquently put it, ‘Words have incredible power. They can make people’s hearts soar, or they can make people’s heart sore.”121 They can make people want to belong or drive them away.

116 As retrieved from Values.com at https://www.values.com/inspirational-quotes/4122-kind-words-can-be-short-and-easy-to-speak-but 117 Attributed to Norman Drummond but several articles say the same thing based on annual reviews of why people leave their jobs. People don’t leave the job, they leave their managers! 118 Snyder, B. (2015). Half of us quit our jobs because of a bad boss. Fortune 2 April as retrieved from http://fortune.com/2015/04/02/quit-reasons/ and Weber, L. (2015). What do workers want from their boss? As retrieve from Wall Street Journal at https://blogs.wsj.com/atwork/2015/04/02/what-do-workers-want-from-the-boss/?mod=e2tw 119 Finnegan, R. P. (2010). Rethinking retention in good times and bad: Breakthrough ideas of keeping your best workers. Boston, MA: Nicholas Brealey Printers.120 There are many visual versions available on the web. THINK is a great discussion started with adolescents through adults. PosterEnvy is where we found this as retrieved through Amazon at https://www.amazon.com/Think-Before-You-Speak-Motivational/dp/B00642A9K4 121 As retrieved from AZQuotes at http://www.azquotes.com/quote/1400236



KEY PRACTICE NO. 6BUILD TRUSTING RELATIONSHIPS


KEY PRACTICE NO. 6BUILD TRUSTING RELATIONSHIPS

Work contexts that build trust. We left building trusting relationships near the end of our discussion since the key practices discussed in the other sections build trust. If you want to build trust 1) form strong social and organizational networks; 2) in which people have mutual respect, 3) build together a fair and just work environment, premised on everyone’s equal moral status, 4) communicate with each other honestly and openly, and think before they speak, 5) and practice reciprocity. These actions provide the context in which trust can be built, fortified and maintained.122

Working collaboratively in an atmosphere of trust leads to accomplishing goals of mutual social and economic benefit.”123 Trust is built when people think the relationships they are in are just, fair, treat them with dignity and respect, allow them to use their talents, gifts and formal training, are based in thinking the best about people, share management authority and control, and provide everyone freedom to act and take risks collaboratively. Trust is built using communication processes that foster direct discussion about differences with each other. Talking about each other behind their backs rarely builds trust. At the core, accountability is about trust!124

People communicate with each other most effectively in contexts where they are treated with respect, seen as equals and worthy of being listened to, and allowed to both succeed and fail without severe consequences. A nonprofit director’s self-esteem and sense of efficacy are greatly affected by the board’s evaluations of their performance, or lack thereof. Without an empowered leader, the organization’s chances of growth are much lower.125

Trust is the belief that an individual, group or organization can be relied upon to act in a consistent, fair, rational, and expected manner. It is shaped by an individual’s values and beliefs formed as a result of previous relationships. Trust is not a general sentiment, but rather a specific trust in something or someone. The actions and conversations among board, staff, donors, funders are either trusted or not, based on what is done, said, and what consequences follow. The sector

122 Putnam, Robert D. (2000). Bowling alone: The collapse and revival of American community. New York: Simon & Schuster. Fukayama, Francis (1995). Trust: The social virtues and the creation of prosperity. Free Press 123 This is Krueter, Young and Lezin’s definition and “incorporates Coleman’s emphasis upon social relations within and among organizations and structures that are built up by people themselves. It also highlights the Putnam’s notions of mutual interest. See Coleman J (1990). Foundations of social theory. Cambridge, MA: Harvard University Press. Also See Putnam RD (1993). The prosperous community: Social capital and public life. The American Prospect, 13:33-42. 124 See Ebrahim, A. (2010). The many faces of nonprofit accountability. In Renz, D. (Ed.). (2010). The Jossy-Bass handbook on nonprofit leadership and management. San Francisco, CA: Jossy-Bass, Third Education, pp 101-121. 125 34 Light, P. (2004). Sustaining nonprofit performance: A case for capacity building and the evidence to support it. Brookings Institution. Brown, K. (2012). Factors Explaining Nonprofit Directors’ Intention to Build Capacity. Ann Arbor: ProQuest Publishers.


needs board members and nonprofit leaders to act in ways that build and nourish trust in each other. It isn’t a blind trust that we talk about!

“If people who have to work together in an enterprise trust one another, it is because they are all operating to a common set of ethical norms ... such a society will be better able to innovate ... since the high degree of trust will permit a wide variety of social relationships to emerge...” --Francis Fukuyama126

When an executive leader doesn’t feel a board leader trusts them, they are less confident in their ability to lead and manage organizational capacity building efforts. When they are less confident, the growth of the organization is impacted.127 Revenues are less, performance is less, volunteers, staff and clients are less.128 While not all relationships have to be trusting relationships, which is unrealistic, a trusting relationship between the executive staff and board leaders, particularly the board chair, does count and statistically effects nonprofit executive leader’s performance and organizational results.129 The board’s leadership in a traditional ‘governing’ relationship confuses the CEO’s evaluations of their own efficacy to control leadership and management direction.130 Active engagement between the CEO and board is needed in an environment that is open and honest, and where adequate two-way communication is built on a firm understanding of equality (acknowledgement of the same moral status) and equity (treating each other fairly, justly, inclusively, respecting differences). All are encouraged to give of themselves and their resources, and to share their networks. All need to get something from these resources and networks in return. Authority, control, and power are mutually shared and legitimized by being in a meaningful relationship with each other. The purpose of the relationships is focused not on self-interests but on achieving the purposes for which the corporation was established. When these behaviors are present, leaders often feel more empowered, trusted, and cooperative.

126 As retrieved from AZQuotes.com.127 Brown, K. (2012). Factors Explaining Nonprofit Directors’ Intention to Build Capacity. Ann Arbor, MI: ProQuest Publishers; and Brown, K. & Robinson, K. (2016). Beliefs and Intentions: Beliefs that affect intentions to build nonprofit capacity. National Association of Nonprofit Organizations and Executives. Governors can find this in NANOE Central in the Capacity Builders Library. 128 Light, P. (2004). Sustaining nonprofit performance: A case for capacity building and the evidence to support it. Brookings Institution. Brown, K. (2012). Factors Explaining Nonprofit Directors’ Intention to Build Capacity. Ann Arbor, MI: ProQuest Publishers. And Brown, K. & Robinson, K. (2016). Beliefs and Intentions: Beliefs that affect intentions to build nonprofit capacity. National Association of Nonprofit Organizations and Executives. Governors can find this in NANOE Central in the Capacity Builders’ Library.129 The trust relationship between the CEO and board chair is particularly significant in the CEO’s willingness and actual intention to build organizational capacity. Brown, K. (2012). Factors Explaining Nonprofit Directors’ Intention to Build Capacity. Ann Arbor, MI: ProQuest Publishers; and Brown, K., & Robinson, K. (2016). Beliefs and Intentions: Beliefs that affect intentions to build nonprofit capacity. Washington, D.C., National Association of Nonprofit Organizations and Executives. Governors can find this in NANOE Central in the Capacity Builders’ Library.130 Adizes, I. (2009). How to manage in times of crisis. Carpinteria, CA: Adizes Institute Publications. Adizes, I. (2005). The pursuit of prime. Carpinteria, CA: Adizes Institute Publications; Light, P. (2004). Sustaining nonprofit performance: A case for capacity building and the evidence to support it. Washington, D.C., Brookings Institution.



KEY PRACTICE NO. 7BUILD ACCOUNTABLE RELATIONSHIPS


KEY PRACTICE NO. 7BUILD ACCOUNTABLE RELATIONSHIPS

“Accountability is a RELATIONSHIP in which an individual or organization is held to answer for performance that involves some delegation of authority to act.”131 Management aims to achieve defined goals within agreed upon timeframes. Management functions usually include setting standards, measuring actual performance and taking corrective actions. Management control processes usually include comparing a) actual vs planned performance; b) the difference between actual and planned; c) examining the causes for the differences identified; d) and taking corrective action to eliminate or minimize the difference.132 Rather than focusing on what an individual does, particularly at the CEO level, the focus is on what the organization as a whole has accomplished and what outcomes, impacts, and value to community have occurred this past year (intended and actual). It is the executive teams job to lead and manage the organization so that positive outcomes occur.

Currently, a CEO’s major accountability and control issues are that too few nonprofits have built the evaluation and IT capacity to know the outcomes and effects of individual, operations, and service performance. Too few nonprofits develop performance evaluation systems in which the indicators upon which CEO performance is based are overtly identified before the performance period under review begins. Too few evaluate staff performance based on outcomes and impacts so evaluators get bogged down in how and what things are done rather than what happened and did it make a difference. Consequently, CEOs continue to find their performance reviews less helpful and satisfactory than desired. Too few boards monitor operation’s performance in relationship to service performance and outcomes. Too few engage in open dialogue about performance evaluation in general. So, while there is a lot of talk about accountability and acting ethically, most of the sector lacks the capacity or CEO-Board agreements necessary to properly and adequately evaluate performance and outcomes, and make fair, just corrections where needed.

Waiting for things to become so bad that multiple stakeholders use multiple media to let the interested public know something is wrong is not being proactive, but rather a sector’s reactive response to unsatisfactory leadership and management behavior.

When leaders wait until things have really gone wrong, they have lost their credibility to exercise their management control over the situation. Someone(s) else is appointed or steps in, often from outside the organization. The board’s authority and management autonomy are lost, as well as the CEO’s. It usually takes many years for the interested public to rebuild trust in the organization and its leaders. Restoration of leadership and management freedoms once enjoyed are slow to return.

131 Romzek, B. S. (2000). Dynamics of public sector accountability in an era of reform. International Review of Administrative Sciences, Vol. 66, pp 21-44. And Romzek, B. S., & Dubnick, M.J. (1998). Accountability. International Encyclopedia of Public Policy and Administration, Vol. 1, pp 6-11. Acar, M., Guo, C., & Yang, K. (2008). Accountability when hierarchical authority is absent: Views from public-private partnership practitioners. The American Review of Public Administration, Vol. 38, Issue 1, pp 3-23.132 Read more at http://www.businessdictionary.com/definition/management-control.html l


In considering organization and leader accountability and management control issues, it is useful to examine the degree to which a CEO and board have autonomy to lead and manage resources, people, operations, and strategies for service creation, delivery, and evaluation, and strategies for growth and changes in use of staff, resources, operations and services. It is also useful to consider the sources of authority used by those that evaluate the CEO and organization because they shape evaluators’ expectations regarding organization and CEO performance. Also, it is useful to consider the beliefs about and use of accountability mechanisms that are characteristic of nonprofits because they tell the CEO and others what is expected of them. These are all inter-related topics.

Authority Sources Used by Boards That Shape CEO Performance Expectations133

By authority source we mean the sources considered most important by those evaluating CEO performance. It is the sources used as the basis for their expectations of satisfactory performance. From these bases, evaluation criteria are either implicitly or explicitly developed and used to judge performance. The criteria used shape evaluators’ expectations of whether CEO performance is good, bad, effective or ineffective. Both leader and organization performance are assessed by various stakeholders. Five major sources used to shape expectations of performance are position, laws and organizational policies, expertise, stakeholder assessments, and evidence-based outcomes, impacts, and value to community.

When position is used as the primary authority source, the evaluators consider the board is the main (in some cases, only) source from which the criteria used to judge effective performance is derived. If the criteria are not overtly defined, performance criteria are generally whatever the board tells the CEO to do in a given year. If the CEO does it, they were obedient to board’s wishes and all is ok.

Positional authority assumes that if one is a board member, they because of their position in the organization, have the most authority and have the greatest management autonomy over all that happens in the life of the organization. Traditionally, the authority and management control structure in most nonprofits was viewed as hierarchical. The people at the top had the most authority and autonomy to manage what happened, and as one went ‘down’ the organizational chart, less management control autonomy was present or given. In hierarchical organizations, what is managed by the board and by the CEO sometimes becomes confused and unstated. The actual performance evaluation criteria that the board uses to evaluate the CEO may not be discussed or defined. In such situations, there is a great deal of ambiguity about what is expected and evaluated at the end of a year’s performance. Each evaluator’s pre-

133 We are grateful for the insights of Barbara Romzek and Melvin Dubneck on accountability and its relationship to board evaluations of leaders and the criteria typically used with each primary source. See Romzek, B. S. (2000). Dynamics of public sector accountability in an era of reform. International Review of Administrative Sciences, Vol. 66, pp 21-44. And Romzek, B. S., & Dubnick, M.J. (1998). Accountability. International Encyclopedia of Public Policy and Administration, Vol. 1, pp 6-11.


existing beliefs about legitimate and valued performance standards are used to judge the CEO’s and organization’s performance.

Because a board member does not have detailed familiarity with the organization’s daily interactions and operations, the criteria used by the board are often input (#s served, # of staff, volunteers, donors, amount of revenue and expenses, #s of contracts and grants, etc.) and process (e.g. #s of events held, #’s of training session done, #’s of development events held, etc.) type assessments. If the board developed a strategic plan, the performance expectation is doing what was agreed. If yes, performance is ok.

Using the standards found in laws and policies is another primary authority source used by some boards. Leaders and the board are expected to follow external laws that apply to their cause and operations, and any internally created policies that may exist.

Some nonprofits are under a great deal of legal authority. For example, charter schools have well over 200 federal and state laws that they must abide by and are required by most state governments to have a student handbook and employee handbook that outlines appropriate behavior considering many of those laws. Health clinics have the same legal environment. It is virtually impossible for volunteer boards to adequately determine if the organization is compliant with all these laws. Not even all lawyers are competent to make such assessments. It often takes hiring a specialized lawyer, in addition to the corporation’s retained counsel, to audit the organization for compliance. Few nonprofits go to this expense.

The basic performance standard for those relying on a law-based authority source to shape their expectations about CEO performance is whether the leadership and organization in general complied with all relevant laws, and followed the internal policies that have been established. If the answer is yes, the CEO’s and organization’s performance is judged as satisfactory.

For many nonprofit leaders, knowing what those laws are and their freedom to act in certain ways is never ending performance challenge. One can see why some nonprofit boards use laws and policy standards as the basis for their performance expectations of ‘good’ or ‘effective’ performance.

Sometimes other organization’s guidelines, standards or codes for effective board, staff, organizational performance are used as the bases to judge CEO and organizational performance. The standards, or principles and practices booklets134 that so many state nonprofit associations have created135 are taken by some board members and CEOs as what the law is, rather than seeing them as suggestions for what is thought to be effective ways to lead, manage, and operate a nonprofit. Some state

134 The National Council on Nonprofits (NCN) lists some of the principles and practices and standards booklets that are available but there are actually more than what is listed because some states and organizations are not members of the NCN. See https://www.councilofnonprofits.org/tools-resources/principles-and-practices 135 As of 2016 there were 31 different versions of standards booklets promoted by one or more state association. These booklets cover the basics and are particularly helpful to new nonprofits with budgets below $500,000.


associations136, seeing this has been a problem, have gone through their standards booklets and starred those practices that are based on state or federal nonprofit laws.

Making performance standards based on following relevant laws, policies, and/or other standards may reduce leadership and management autonomy to create and modify organizational structures and processes needed to grow the organization and improve services and outcomes. It certainly will direct CEO performance evaluation to primarily focus on whether laws and policies were followed.

Internal policies created by boards may act as a major source by which CEOs and the organization are held accountable for performance, or they may have little weight at all. Some boards or CEOs require their leaders to annually sign a statement that all staff and volunteers have read the organization’s policies or some selection of policies. But there are examples of boards spending hundreds of hours creating policies for the organization and within a year or two, no one is following them, not even the re-constituted board! As board members rotate off, policies and procedures are forgotten. For example, lack of following existing grievance policies and procedures often is problematic when an actionable offense has occurred, but neither the board nor staff followed their own policies and procedures consistently and as stated!

The type of evaluation criteria for those using laws and policies/codes/standards is typically input and process oriented. Did they comply with what is found in the laws/codes/standards? How many grievances occurred and how were they handled and what is their status? Did they comply with what was suggested in the standards? Did they train staff based on the standards? Did they let the donors know they conformed to the standards?

Another primary source of authority that manages expectations for CEO performance is executive expertise. If a CEO has a great deal of nonprofit management experience and formal training in nonprofit leadership and management or a related field, the board may give him/her a high degree of management autonomy over the use of resources, staff, operations, and services. Strong CEOs with a strong board often share their expertise and the CEO feels free to talk with board members about specific areas where the board may have more expertise than they do. The strong board and CEO find the expertise needed to address their needs and build capacity. Or the board may just rely and defer to the CEO for all business and expect the CEO to just keep them informed on the status of things.

The type of performance evaluation criteria used often is input, process and output kinds of information. For example: How many were serviced? How many events were held? How many donors do we have and did that number increase? What was the revenue and expense profile this month, this year? Was an external audit of books done? Did it showed the staff complied with CPA-approved practices? Did we end the year in the black? What were some stories that tell us what’s happening with clients? What did you (CEO) accomplished this year?

136 The leader appears to have been the Michigan Nonprofit Association. Their starred booklet helping reader sort out what was MI law and what were suggestions was available until just recently. See Principles and Practices Guide for Nonprofit Excellence in Michigan at https://www.mnaonline.org/principles-practices-guide/file


Another primary authority source that shapes expectations for performance is what multiple internal and external stakeholders say are the organization’s and leaders’ ability to produce outcomes and impacts meaningful to them and in a manner acceptable to them. Boards may make their performance expectations clear but that still doesn’t factor in what expectations others have of CEO and organizational performance. Some boards secure assessments from multiple stakeholders including staff, clients, volunteers, donors, funders, other affiliating nonprofits, and interested publics.

“Accountability breeds Responseability”--Steve Covey137

In networked organizations, multiple stakeholder surveys are done because of the multiple boards and senior leaders located in wide geographic areas across the USA and in other nations. It would be ridiculous for the headquarters’ board of directors to evaluate CEO and organizational performance based only on their view of things. Networked organizations’ CEO and boards know that their various units must have a high degree of management autonomy to meet the demands and needs of people they serve and lead given the contextual realities they have. Examples could be given of national startups that disappeared within a couple years because headquarters leadership refused to recognize the need to give a high degree of management autonomy to local units.

High performing nonprofit leaders engage a panel of internal and external stakeholders in creating the evaluation criteria upon which leader and organizational performance are judged. The questions tend to be output-, outcome-, impact- and value-oriented.

Prior to the beginning of the performance review, the leadership may give a thorough annual review of progress made on key service and operation indicators. These indicators compare the outputs and outcomes at the beginning and end of the year and identify areas that were excellent, satisfactory, and not satisfactory. The performance indicators are linked to the key indicators of operations, service, client outcomes desired.138 Leaders know the basis upon which their performance will be judged so that they know where to apply their efforts. Judging performance without clear understanding of the criteria that will be used to judge performance is not considered fair or just treatment of leaders or staff.

Stakeholder assessments are guided assessments. It’s not free-wheeling, anything you want to say solicitations, but mission- and outcome-related. However, there usually is also one section of the survey or interview guide that is open-ended where people can provide additional positive feedback, as well as areas of concern that need senior leadership attention.

Sometimes, the expectations noted in the open-ended section are not in keeping with the mission or action plans but they do tell leaders that more public relations and communication are required with various stakeholder groups. Stakeholder expectations of what they think the leadership and organization should be doing and aren’t gives clues as to the real value and affect the organization is

137 As retrieved from BrainyQuotes.138 Some have created dashboards to track in real time key indicators of service, operations, client outcomes. See NANOE’s Growth Series booklet entitled Growth by evaluating services, operations, and impacts for details.


having on various groups. Their feedback may act as a wakeup call to leaders that they need to go in a different direction, do something differently, or that there is a problem they didn’t even know about.

A significant sample of clients, staff, donors, funders, and other key community leaders that are somehow affiliated with or work with the organization are surveyed. It’s not a convenience sample which may end up being biased. The sample and interview or survey instrument are statistically valid and reliable. Expertise is secured that can craft good surveys or interview guides, sampling procedures, and data gathering, management, analysis and reporting processes. The survey instruments contain the type of questions that allow analysis of effects of various areas of performance on various types of individuals and groups. Shaping survey questions in ways that only yield percentages doesn’t tell leaders what they need to know to make good evaluations about leader or organizational performance.

In the literature on scale, some authors talk about the new breed of CEO and boards that evaluate CEO and organizational performance based on internal and external stakeholder input as ‘being socially responsible or responsive’.139

Another major authority source that leaders use to shape their expectation about acceptable performance is evidence-based outcome, impact, and value-to-community evaluations. Some management writings indicate the ultimate basis upon which a CEO should be evaluated is on the effects the organization has on its clients and customers, and the impacts on and value to the communities the organization serves. Some leaders suggest that the CEO should be given a high degree of management autonomy to lead the organization and manage its resources and operations so that it can accomplish mission and achieve significant positive outcomes, impacts, and value to the community. The CEO is held accountable for the outcomes and impacts achieved. Accomplishments are reviewed but more time is spent on evaluating the results.140

The CEO works with various people within the organization to create and track desired outcomes related to all facets of the organization.141 Key indicators are created for each outcome sought and tracked either in real time or quarterly. Performance is compared over time for trends. CEO performance evaluation is based on progress made in accomplishing outcomes and signs of positive, significant community impact. The CEO is expected to present what the economic and social value

139 Romzek, B. S. (2000). Dynamics of public sector accountability in an era of reform. International Review of Administrative Sciences, Vol. 66, pp 21-44. And Romzek, B. S., & Dubnick, M.J. (1998). Accountability. International Encyclopedia of Public Policy and Administration, Vol. 1, pp 6-11. Acar, M., Guo, C., & Yang, K. (2008). Accountability when hierarchical authority is absent: Views from public-private partnership practitioners. The American Review of Public Administration, Vol. 38, Issue 1, pp 3-23. And Bloom, P. N., & Skloot, E. (2010). Scaling social impact: New thinking. New York, NY: Palgrave Macmillan.140 Obviously, the means must be legal, ethical and moral because that is examined. Boards usually ask what did you accomplish and so what?141 For example, key client, staff, service delivery, operations outcomes, selected impacts on various organizations and groups in the community that are intended and happened but not intended, and the economic and social value to the community.


to the community has been. While the CEO doesn’t evaluate, they make sure evaluations get done, by staff and/or external evaluators hired or volunteers.

“The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer.”

--Peter Drucker142

Multiple sources are used by various evaluators

While there is typically a primary source used to shape evaluators’ expectations and criteria, various evaluators will use different authority bases to judge CEO and organizational performance. Effective leaders openly and proactively discuss the indicators that will be used to judge their performance and the kinds of information that evaluators want to see to verify performance claims. They actively build a case for performance being judged on results.

While organizations tend to have one of these as their primary source upon which performance is judged, all the sources are used to some degree and in some priority order. As leaders and board members change so do the priority sources change. For example, complying with principle and practice standards may be used at one point, and then relying on the expertise of the CEO used at another point. Or there may be a balance in relying on the CEO’s expertise with being responsive to multiple stakeholders’ assessments of leader and organizational performance. As crises develop, what was used as a priority source may be supplanted by another. For example, boards may rely on the CEO’s expertise until something goes wrong and then they may (and tend to) quickly switch to laws or policies to judge performance (and dismissal).

The type of criteria used to judge CEO performance and CEO behaviors sought. One can determine the authority sources used to evaluate performance by what criteria and sources of information they request be provided to show evidence of performance effectiveness.

When board members’ position is used as the major basis, very little input is usually sought from external (to them) sources. Obedience is what is fundamentally required. Evaluations tend to be ‘did you follow what I/we said to do, and, if so, all is ok. Often the only basis used to judge performance is a review of whatever budget sheets are presented by the CEO to the board, and periodic reports of events held and numbers of clients served. There may also be a review of the annual external audit, if done. If a strategic plan was created, the basis is faithfulness to doing what was planned. The information tends to be input- and process-oriented, and efficiency measures tend to be used. For example, did leaders spend money efficiently? Did they use their time and resource efficiently? Did they accomplish what was planned? Did they execute actions as indicated in formal board decisions?

142 Retrieved from QuantiSoft.com.


“Customers don’t expect you to be perfect. They do expect you to fix things when they go wrong.”--Donald Porter143

If a primary basis for evaluation is law and policy-based, the board tends to ask for evidence that laws and policies were followed and that leaders dealt effectively with those that didn’t follow them. Compliance to external laws and internal policies is key. The kinds of information presented are also mostly input- and process-oriented. For example, the board may ask questions like: how many law violation incidents occurred with what penalties to the organization, its assets, and reputation? How many grievances were filed and what were the outcomes? How many run-ins did the organization have with funders because of contract or grant violations? Did the leadership manage the finances in CPA-accepted ways? Were corrections in bookkeeping and expenditure reporting and tracking made based on last year’s CPA report? Did the areas of service delivery that were deficient get corrected, particularly those that needed to comply to state or federal law requirements or to the organization’s policies and procedures? Did leadership comply with the Standards of Excellence or Principles and Practices booklet issued by the state association and adopted by our organization?

If a primary basis for evaluation is the leadership’s expertise, the board tends to rely on and defer to the expertise of the CEO to lead and manage effectively. To varying degrees, a board may defer to and rely on the CEO’s expertise and judgement regarding most management areas. What the CEO presents to the board as evidence of satisfactory performance is much contingent on their training and how comfortable they are with their board. It can be merely input and process type information or it can include output, outcome and impact information.

“When it comes to privacy and accountability, people always demand the former for themselves and the latter for everyone else.”--David Brin144

Board’s deferring to and relying on leadership expertise may also become disengaged, if they think they don’t have to worry about the organization because it’s in good hands. The trust, but verify principle may not in play. The board may not be fulfilling their duties of loyalty, care, and obedience to the corporation as discussed in this guideline. But when a good relationship of the kind discussed in this guideline exists, the expertise that the board relies on and defers to may be shared among executive leaders. The challenge is making sure that there is not over-reliance on the CEO in areas where their expertise is weak. When positive relationships between board and executive staff exist, there is freedom to discuss areas that need more expertise. Both the CEO and board strive together to build capacity in those areas.

If a primary basis for evaluation is multiple internal and external stakeholder assessments, the board ensures a valid, reliable sample of internal and external stakeholders are surveyed or interviewed, and the criteria used in the design of the survey are related to the organization’s stated goals and annual outcomes sought, as well as leadership features they want. The board and CEO are involved in the development of the questions asked and the nature of other information sought. If the organization

143 Retrieved from QuantiSoft.com144 Retrieved from BrainyQuotes.com


has a core values statement, there may be questions on how evident these core values are in the leaders’ and staff’s behavior towards them and others.

The primary objective of involving multiple stakeholders is responsiveness to and meaningful connection with multiple groups that have some stake or interest in the organization, what it accomplishes, its outcomes and impacts on them, and value to them. The board and leaders understand they are entrusted to serve the corporation’s interests, and to do so in a manor found acceptable to those that contribute to the organization or are reliant on the organization performance in some way.

“We believe strongly in transparency and accountability, which is why Teach for America encourages rigorous independent evaluations of our program. Our mission is too important to operate in any other way.” --Wendy Kopp145

Various stakholders will have a primary authority source they use to judge leadership and organization performance. Knowing the bases for their assessments are important to the organization’s growth, effectiveness and impact. In one sense, the organization’s leadership risks sharing some management control over what is done and how when they involve multiple stakeholders in the performance review process. They understand the results may have a bearing on the use of corporation resources, what it does and how it does it.

The board and executive staff understand that they are to care for, be loyal and obedient to making sure the organization accomplishes its stated mission, and manages its resources wisely, fairly, justly and in ways that grow its value to the community and mightily impacts the lives of those served. Stakeholder assessments and valued directions for the organization are weighed by the board and staff in relationship to their duties of loyalty, care, and obedience to the corporation’s interests and mission.

“The definition of insanity is to keep doing the same things and expecting a different result.”--Stephen Covey146

The CEO’s performance is based on stakeholders’ assessments of the organization’s performance and their effect on them and their organization’s work. The CEO is judge based on the normative culture present and whether the organization and its leadership meets expectations and had a positive influence on them and the community. The evaluators of CEO performance are looking for evidence of how socially responsive the CEO was to internal and external stakeholders.

To be clear, not all people will like a given CEO, particularly if they are a strong, courageous CEO who tries new ways of doing things and has a clear vision of where they want to take the organization. Some will see the nonprofit’s work as competing with their own. A CEO and board that seeks stakeholder feedback reports results and tells stakeholders what they are doing and not

145 As retrieved from Brainyquotes.com146 As retrieved from QuantiSoft.com


doing with the feedback and why. They decide to whom to limit and/or temper response. It takes a board’s combined wisdom and insights to deal with some critics that really don’t have the nonprofit’s best interest in mind. It takes wisdom to know when what they are saying is right, even if it means serious review of what they are doing and how. There is danger in outright ignoring claims about performance, but it’s not always clear if the claims are accurate or not. Sometimes, legal counsel must be sought to determine the leaderships’ freedoms in what it does and how, particularly when the leadership is innovating new approaches to operations, services, and organization. In all cases, leaders report back to stakeholders what was said and what the organization plans to do and why, based on what was said. Seeking feedback and not giving a report back is not practicing recriprocity!

If the primary source used to guide the performance accountability expectations are evidence of the outcomes, impacts and value to the community, the CEO will be asked to build capacity and present evidence of outcomes, impacts and value.147 The board will expect the CEO to have built evaluation capacity. They will want to review indicators of outcomes and impacts and how results compare to other points in time. They will want to know what the CEO did to correct areas of services, operations, staff structuring and relations so that outcomes sought were achieved or at least show a positive trend towards achievement.

“Your most unhappy customers are your greatest source of learning.” --Bill Gates148

In summary, the primary sources used to manage a board’s expectations for CEO and organizational performance are based on position, laws and policies, expertise, and internal and external stakeholder input, and/or evidence of outcomes, impacts and value to the community. These sources tend to orient the board’s beliefs, attitudes, expectations and behaviors regarding the degree of autonomy the CEO is given to manage all aspects of the organization. These sources also tend to determine the evaluation criteria used to evaluate CEO and organization performance.

High performing leaders and nonprofits pay close attention to performance based on evidence of the nature and extent of outcomes, impacts, and value to the community, and as assessed by multiple internal and external stakeholders. Input, process, output, outcome, impact, and value indicators are used to determine the CEO’s and organization’s current performance effectiveness.149

What is expected of a CEO ranges from obedience, to compliance, to deference and reliance, to responsiveness and connectedness, to securing evidence of effect, impact, and value. It shifts from internally-created (i.e. position, policies, internal stakeholder assessments, evidence of outcomes) sources of performance expectation to externally-created sources (i.e. laws, external stakeholder

147 Outcomes, impacts, and value are not the same things. A thorough discussion of this statement is found in NANOE’s guideline booklet entitled Growth by evaluating services, operations, and impacts. This booklet is part of NANOE’s Growth Series. Governors who are NANOE members can find this booklet in NANOE Central in the Capacity Builders Library. 148 As retrieved from QuantiSoft.com149 All these things are discussed in detail in NANOE’s Growth Series booklet entitled Growth by evaluating services, operations, and impacts. Also see glossary in Appendix B for definitions of these terms.


assessments, evidence of impact and value). What is recognized as a legitimate standard used to judge CEO and organizational performance varies from time to time as board members and CEOs come and go. Usually multiple authority bases are present among every organization’s evaluators of performance. Which source(s) are considered of primary importance vary from organization to organization, and among individuals within and affiliated with the same organization.

The best opportunity for valued performance evaluations to occur is when board members and CEOs openly discuss the criteria that will be used to evaluate performance. Unless this is done, CEOs and board members will never be satisfied with performance reviews. Clarifications needed to guide management performance will be missing. Identify the indicators that will be used during performance assessments. Identify the performance levels required for each indicator. Define these things at the beginning of the performance period, not after the fact.

Networked nonprofits tend to judge performance based on outcomes, impacts and value to the regions they serve. CEO responsiveness to internal and external stakeholders is factored into this assessment of outcomes, impacts and value. Key service and operations performance indicators are monitored. Key customer outcomes, impacts and value are monitored. Everyone in the organization can see results in real time and knows whether the organization is performing well and where they need to apply more effort. Everyone knows when what they are doing needs to be adjusted and productivity increased. Everyone knows where resources may need to be applied so that unsatisfactory areas are improved. There is a sense of collective responsibility, while understanding that the leaders create the social, work, and communicative tone for the organization. Networked nonprofits build the capacity they need to make monitoring performance a routine, automated feature of management practice.


SUMMARY& APPENDICES


HARNESSING THE POWER OF DIFFERENTIATED RELATIONSHIP

SUMMARY

To promote growth, a board and executive staff work hard to establish quality relationships with all who have a stake or interest in the organization. The organization’s leaders must build enough social capital to promote the development of other kinds of capital, including financial capital and new kinds of revenue streams. In summary, to build necessary and sufficient social capital, leaders must do the following:

• Form engaged, workable, positive relationships.• Network with other people and organizations in formal ways. • Engage in deliberative dialogue.• Provide management autonomy to leaders as they strive to accomplish a common mission,

goals, outcomes, impacts, and value to the community. • Consider each other as having the same moral status. • Treat each other and all affiliated with the organization fairly and justly.• Engage in reciprocal transactions in networked relationships. • Involve and respond to multiple stakeholders’ assessments of and insights about the

organization and its leadership.• Monitor and assess the inputs, processes, outputs, outcomes, impacts, and value of the

organization’s work.• Evaluate individual performance relative to the organization’s outcomes, impacts and value.• Remain adaptive to changing times and stakeholders’ needs and interests.• Build capacity throughout the organization and not just in one or a few areas.• Execute their fiduciary duties of loyalty, care, and obedience to the corporation’s interests, use

of assets, and mission.• Engage in honest, open communication in which they listen as well as talk, and before they

talk, particularly when corrective messages have to be given, they ask themselves is what I’m about to say truthful, helpful, inspiring, needed, and kind?

• Collectively hold each other accountable by monitoring the organization’s outcomes, impacts and value to the communities served.

• Courageously adapt organizational relationships and processes to deal with growth and change in circumstances.

• Seek to alleviate social, cultural, and environmental issues in addition to serving them.• Seek to grow to a scale required to accomplish their mission and meet society’s needs to

alleviate major issues related to cause. When these things are done, the political, social, and economic value are created for the people who are connected to the organization. Securing the nonprofit’s success and growth requires we examine the nature and quality of relationships present so that social capital development occurs, is supported and flourishes.


APPENDIX A CORE VALUES EXPRESSING RELATIONSHIP NORMS

The top 5 largest nonprofits, according to Forbes 2016 Top 100 Nonprofits review were examine for their statement of core values that guide actions within their organization. Below is results.

United Way Worldwide150 - 1st largest nonprofit in USA

No listing of total core values found on website. But when ‘core values’ is typed in search field the following is provided.

Diversity and Inclusion

United Way strives to be a model of diversity and inclusion. Our Board of Trustees, staff and volunteers reflect the many faces, cultures and walks of life that proudly make up our world.We respect, value and celebrate the unique attributes, characteristics and perspectives that make each person who they are. We also believe that bringing diverse individuals together allows us to collectively and more effectively address the issues that face our communities. It is our aim, therefore, that our partners, strategies and investments reflect these core values. Definitions:

di·ver·si·ty (d-vûrs-t, d-) n.: the quality of being different or unique at the individual or group level. This includes age; ethnicity; gender; gender identity; language differences; nationality; parental status; physical, mental and developmental abilities; race; religion; sexual orientation; skin color; socio-economic status; work and behavioral styles; the perspectives of each individual shaped by their nation, experiences and culture—and more. Even when people appear the same on the outside, they are different!

in·clu·sion (n-klzhn) n.: a strategy to leverage diversity. Diversity always exists in social systems. Inclusion, on the other hand, must be created. In order to leverage diversity, an environment must be created where people feel supported, listened to and able to do their personal best.

Statement of Principle - United Way Worldwide

More than 125 years ago, the diverse community leaders who founded United Way crossed cultural, religious and economic boundaries to make a difference through collective action. Today, diversity and inclusion remain vital to achieving our mission, living our values and advancing the common good.

150 As retrieved from United Ways Worldwide website on 7/1/2017 at http://www.unitedway.org/about/diversity-and-inclusion


United Way fosters and promotes an inclusive environment that leverages the unique contributions of diverse individuals and organizations so that we can collectively and effectively create opportunities for a better life for all.

United Way takes the broadest possible view of diversity, going beyond visible differences to affirm the essence of all individuals including the realities, background, experiences, skills and perspectives that make each person who they are. Engaging the power of diverse talent and partners results in innovative solutions and the community ownership necessary to address complex community issues.Diversity and inclusion are at the heart of what it means to LIVE UNITED.”

The Task Force for Global Health - 2nd largest nonprofit in America

As with many nonprofits, the Task Force for Global Health articulates their core values in the same section where they identify their mission151.

“Infectious diseases, vaccine-preventable diseases, and weak health systems are barriers to health and development for developing countries. The Task Force sees a world with the resources and means to address these issues. Our mission, vision, and values are rooted in the belief that all lives have equalvalue and everyone should have equal access to the means for good health. We recognize that the world’s poor lack political voices, so we advocate for their health needs through our work. We apply rigorous science and compassion for the people whom we serve in all of our programs and projects.

Mission: To solve complex health problems affecting vulnerable populations around the world and to build durable systems that protect and promote heath

Vision: A world free of debilitating diseases where all people are served by effective public health systems

Values: • Collaboration – We believe partnerships are essential. Organizations working together have a

much greater impact than they can when working on their own.• Global Health Equity and Social Justice – We work to provide all people, especially the world’s

poor, with opportunities to lead healthy, productive lives.• Stewardship – We pride ourselves in the wise and judicious management of the resources

entrusted to us.• Consequential Compassion – We link compassion to effective actions by being aware of the

suffering of others, understanding the causes of that suffering, and engaging in informed actions to alleviate it.

The statements of ways they accomplish their work also touch on their core values. They also

151 As retrieved from the Task Force For Global Health on 7/2/2017 at https://www.taskforce.org/about-us/mission-vision-and-values


have a very impressive video that present the challenges in achieving their values of collaboration, cooperation and partnership and upholding equity and social justice. Below is the key statements about their approach to work. (See footnote 27.)

Overview152

Global health problems are far too large in scale for any one organization to address on its own. Partnerships are absolutely essential. Since 1984, we have employed a powerful model of collaboration (described in Real Collaboration: What It Takes for Global Health to Succeed) that was originally used to eradicate smallpox – the only human disease ever permanently wiped out – to affect a broad range of global health issues. We mobilize and serve as vital members of partnerships to control and eliminate neglected tropical diseases, increase access to vaccines, and improve the ability of countries to detect and respond to disease outbreaks and injuries.

Even with the right partners at the table, controlling and eliminating diseases is a daunting undertaking. To implement programs, we need to know who is infected or at risk. The Task Force applies rigorous science and sophisticated laboratory and information technologies to map and diagnose neglected tropical diseases. We also test new drug combinations for eliminating these diseases.

Advocating for the Health Needs of the World’s Poor

Regardless of the program, at the core of our work is a deep compassion for the people whom we serve. We keep their faces in the forefront of our minds and are driven to alleviate their suffering. Our compassion is tied directly with effective actions – what we call “consequential” compassion. Learn more about all of the values that shape our work.

At The Task Force, we do not have the burden of complex or bureaucratic decision-making processes. Our nimble and responsive administrative structure allows us to respond swiftly to global health priorities. And because of our efficiency, we can leverage resources for an extraordinary impact.

Harnessing Technology to Improve Global Health

Sophisticated information and laboratory technologies are vital tools in The Task Force’s work to control and eliminate diseases and increase access to quality health care for people in developing countries. Using a smartphone-based data collection system, we map the prevalence of neglected tropical diseases (NTDs) to determine where interventions should be implemented. We use portable molecular technology and tablet-based systems to detect and diagnose NTDs within populations. We also use diverse technologies to help developing countries manage their healthcare workforce in order to meet the health needs of their populations.

152 As retrieved on 7/1/2017 from The Task Force For Global Health at https://www.taskforce.org/our-work/our-approach


A video Expressing Core Values and Challenges in Realizing Them

They also share their core values in an impressive video called Collaboration for Good Health.153 Main core values are around collaboration, cooperation and partnership, social equity and justice. It presents well the challenges of creating collaborative, cooperative partnerships among organizations which are just and solve health issues globally.

Feeding America - 3rd Largest Nonprofits in AmericaCode of Ethics154

Feeding America was founded for the public good.We are always mindful that our ability to achieve this mission relies upon the faith and trust of the general public. As an organization we constantly strive to meet the highest standards of excellence and operate under a code of business and professional ethics that honors our public support. Ethical conduct is part of every employee’s job and a source of public confidence. It is the benchmark against which everyone must ultimately test all decisions.

Foundation for the Code of EthicsFeeding America has adopted a shared set of core values that give guidance to the organization as to how to achieve our vision of creating a hunger-free America. These values provide a standard of expected behavior and a framework for decision-making for the staff, volunteers and partners. They are, therefore, the foundation of our Code of Ethics.

Who is Responsible for Feeding America Code of EthicsAll Feeding America employees are required to adhere to accepted business standards of conduct while on the organization’s premises or engaged in organizational business. We may not engage in any illegal, fraudulent, dishonest, negligent or otherwise unethical action in connection with Feeding America operations or activities.

Each of us is responsible for the professional integrity of our own work. We are also responsible for reporting wrongdoing. If a law or organization policy has been broken, all employees have a duty to report this, verbally or in writing, promptly and confidentially through the line of administrative supervision. When the alleged impropriety appears to involve a management employee, reports should be referred to the Senior Vice President of Human Resources or the President/CEO. Reports of suspected financial irregularities should be reported directly to the Chief Financial Officer and President/CEO. Any department supervisor alerted to such an incident must immediately notify the Senior Vice President of Human Resources.

153 See Collaboration for Good Health at https://www.youtube.com/watch?v=uQsV8yKgypA 154 As retrieved from Feeding America’s website on 7/1/2017 at http://www.feedingamerica.org/about-us/about-feeding-america/job-opportunities/national-office-jobs/culture/


Leadership

• Leaders Matter at All Levels — Leadership in our organization is critical to realizing our vision of a hunger-free America.

• Inspiration — To fulfill our mission, we strive to play a major leadership role in the hunger space and seek to inspire our teams and the nation in the fight to end hunger.

• Teamwork and Partnerships — We collaborate and build strong relationships based on trust to advance our vision of creating a hunger-free America.

Learning

• Empathy — We start with compassion to understand the feelings, experiences and needs of people facing hunger.

• Innovation and Imagination — We continuously seek knowledge to nurture new ideas and foster an environment for them to flourish.

• Agility — We anticipate trends and adapt quickly to changes in our environment.

Excellence

• Integrity — We act with honesty, transparency, accountability and mutual respect and uphold our commitments through the efficient, responsible and thoughtful use of resources.

• Impact — We are committed to excellence in everything we do for the purpose of improving outcomes for people facing hunger.

• Diversity, Equity and Inclusion — We are enriched when we embrace all aspects of diversity and build an inclusive workplace where everyone can thrive.

• All food and product donors will be informed, upon request, in an accurately and timely manner of where their national donations are distributed.

Salvation Army USA, UK, Ireland - 4th Largest Nonprofit in America

They don’t have a set of institutional core values stated on the USA website but if one takes the time to go back to the United Kingdom website there is a set of core values described. On the USA Salvation Army website, they don’t express core values but they do have a doctrinal statement which is not the same thing. The USA Salvation Army website does provide a mission statement in which there is an expression of one core value. Individual ‘territories’ (i.e. their name for organizational units in different geographical spaces) within the US may have core value statements.

“Our Mission (As found on US Salvation Army website)

The Salvation Army, an international movement, is an evangelical part of the universal Christian Church. Its message is based on the Bible. Its ministry is motivated by the love of God. Its mission is to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination.”155

155 As retrieved on 7/1/2017 from http://www.salvationarmyusa.org/


If one takes the time to go back to the roots of the organization in the United Kingdom, core belief statements can be found on the UK and RI website and are as follows.

Our Mission in the United Kingdom Territory with the Republic of Ireland156

Called to be disciples of Jesus Christ, The Salvation Army United Kingdom Territory with the Republic of Ireland exists to save souls, grow saints and serve suffering humanity.

Our Vision

As disciples of Jesus Christ, we will be a Spirit-filled, radical, growing movement, with a burning desire to lead people into a saving knowledge of Jesus Christ, actively serve the community, and fight for social justice.

Our Values

Our identity and God-given mission as disciples of Jesus Christ are shaped by the values of the Kingdom of God. We love God with all our heart, soul, strength and mind, and we love our neighbour as Ourselves.

We have Integrity in everything we do, being reliable, trustworthy, transparent and honest in our personal and business relationships.

We are Accountable to God in every area of our lives and to others in all our dealings.

We have Compassion for all people.

We are Passionate about unconditionally demonstrating God’s love to everyone.

We have Respect for people and planet, seeing the God-given potential in every person and being stewards of the environment.

We are Bold in proclaiming the gospel in everything that we do and in fighting for social justice.

YMCA of the USA - 5th largest nonprofit in the USA

When one types ‘core values’ into their search engine several narratives appear. All say their core values are honesty, caring, respect, and responsibility. Under their ‘organizational profile’ page, there is one sentence which says “The Y is guided by four core values: caring, honesty, respect and responsibility.” No further clarification is provided.

In their Strategic Plan for 2014-2017, they identify their core beliefs as follows:

156 As retrieved on 7/1/2017 from https://www.salvationarmy.org.uk/mission-vision-values


• “We believe that when we devote our full strength to the Y’s mission and cause, work in partnership with others, and build on our history of innovation, we can address the most pressing issues of our time unlike any other organization.

• We believe all people have potential.

• We believe active and connected families make for active and connected communities.

• We believe in a holistic approach to development, promoting healthy spirit, mind, and body.

• We believe that in a diverse world, we are stronger when we are inclusive and our doors are open to all.

• We believe in honoring our mission, living our cause, acting in accordance with our values, and placing the greater good above self.”157

On their main website, their core beliefs are referenced more overtly under the heading ‘diversity and inclusion”. They are as follows:

DIVERSITY & INCLUSION158

Our Commitment to Inclusion: The Y is made up of people of all ages and from every walk of life working side by side to strengthen communities. Together we work to ensure that everyone, regardless of ability, age, cultural background, ethnicity, faith, gender, gender identity, ideology, income, national origin, race or sexual orientation has the opportunity to reach their full potential with dignity. Our core values are caring, honesty, respect and responsibility – they guide everything we do.

For All

For all is a simple but powerful phrase. Without it, the Y mission is incomplete. Our commitment to inclusion creates better communities, a better country and a better world.

We know that the key to effectively nurturing the potential of children, improving the nation’s health and well-being and supporting our neighbors is a passionate, experienced and diverse array of staff, volunteers and members who value what everyone brings to the table. Working in 10,000 U.S. communities and more than 120 countries worldwide makes strong diversity and inclusion practices paramount for the Y.

157 As found in YMCA. (nd). Delivering on Cause: Strategic Plan 2014-2017 as found at http://www.ymca.net/sites/default/files/organizational-profile/Delivering-Our-Cause-Strategic-Plan-Online.pdf Delivering Our Cause is the third strategic plan of a ten-year long strategic plan initiative.158 As retrieved on 7/1/2017 from http://www.ymca.net/diversity-inclusion/


This means:

• Recognizing that a diverse and inclusive organization is foundational to developing and engaging everyone across the entire Y spectrum. Our volunteers, members, program participants, families, leaders, staff, vendors, suppliers, donors, collaborators and the community at large all contribute to our efforts to make positive, lasting personal and social change.

• Believing we all benefit from the unique talents of our diverse staff. We encourage our 20,000+ Y stff to participate in our six national Employee Resource Groups, which offer opportunities to contribute, learn, network and share experiences as they progress in their careers.

• Having a supplier diversity program that seeks out talented minority and women-owned contractors and service providers.

• Offering Y staff and volunteers professional development and training programs that build key competencies to welcome, engage, serve and advocate for all segments of society.

• We are passionate about our cause to strengthen communities and know that our ability to achieve it begins with reflecting and partnering with people from all walks of life.


APPENDIX BGLOSSARY OF TERMS

Accountability: a RELATIONSHIP in which an individual or organization is held to answer for performance that involves some delegation of authority to act.159

Authority source: the sources considered most important by those evaluating CEO performance. It is the sources used by performance evaluators as the basis for their expectations of satisfactory performance. From these bases, evaluation criteria are either implicitly or explicitly developed and used to judge performance

Bonding networks build strength and solidarity among those who act and think like each other in fundamental ways. In the “like us and them” mix; bonding networks are the “like us” kind. The networks formed can be for personal benefit and or can be organization to organization connections to accomplish mutually agreed upon ventures. It is organization to organization networks that are most emphasized in this guideline and which leaders are encouraged to develop.

Bridging networks connect people and organizations who think and act differently from “us”. They may have different worldviews, different purposes, different resources, different organizational structures and operations. Leaders are encouraged to build bridging organization to organization networks to accomplish missions. The purpose of the network formation is for the enhancement of missions of mutual interest.

Capacity: a wide range of capabilities, knowledge, and resources (i.e. “capacities”) needed by nonprofits to be “vital and effective in staying true to their mission”.160

Cooperative action: joint activities of networked organizations that are based on efforts to create a durable, pervasive relationship that permits those involved to achieve mutually beneficial results.

Capital: a currency that has value and is used to produce goods, services, relationships, human, organizational, social, and/or economic development. Two kinds of capital are discussed in this guideline, social capital and economic capital. Increasing a nonprofit’s social capital often increases the ability of the organization to secure financial capital. When this term is used in reference to a

159 As defined by Romzek, B. S. (2000). Dynamics of public sector accountability in an era of reform. International Review of Administrative Sciences, Vol. 66, pp 21-44. And Romzek, B. S., & Dubnick, M.J. (1998). Accountability. International Encyclopedia of Public Policy and Administration, Vol. 1, pp 6-11. Also see typical ways accountability in ensured in shared governance organizations in Acar, M., Guo, C., & Yang, K. (2008). Accountability when hierarchical authority is absent: Views from public-private partnership practitioners. The American Review of Public Administration, Vol. 38, Issue 1, pp 3-23.160 Connolly, P., & York, P. (2003). Building the capacity of capacity builders: An executive summary of a study of management support and field-building organizations in the nonprofit sector. New York, NY: The Conservation Company, September


nonprofit’s finances, capital is the money secured as an investment in the nonprofit to generate more impact. Capital investments seek growth in the organization’s capacity and scale so it can achieve greater impact with more customers in larger geographic areas. It is different from revenues generated to maintain existing operations and services.

Dashboards: Electronic displays of data on key performance indicators which help decision makers determine whether performance is significantly what is above planning goals, what is at performance goals, what is below and significantly below performance levels desired. They are information management tools.161

Engaged relationships: At the executive leader level, engagement means that the directors (paid and voluntary) are actively involved in performing their fiduciary responsibilities of care, loyalty, and obedience. They have read the state nonprofit law for the state in which they are incorporated. They are not relying on or deferring to other directors, but are independently engaged in exercising their duties. They seek and request information from multiple sources, are responsive to internal and external stakeholder feedback, and are transparent in how they exercise their duties. Leaders seek ways to examine outcomes, impacts and value of the services to customers and the communities or regions they serve. Networked organization leaders represent their corporate interests as well as that of the combined joint venture. All leaders actively ensure the corporation’s transactions are legal, just, fair, efficient, and effective. They seek to alleviate problems in addition to servicing them. Governance is shared and responsive to multiple stakeholders and changing situations. Equality: our moral status in relationship to others is the same. Equality is not something people give to people, but is the status attributed by the Creator to all humans. We are in the Creator’s image. Thinking that every person you ever encounter is your equal in moral status must be willfully allowed to affect your attitudes and beliefs about others fundamental worth and relationship to you. When you see others moral status is considered just as worthy and the same as yours is, you can begin to work on your interactive behavior around others. Those in leadership and management roles are not of higher moral status than any other person in the organization. Leadership, management and governance actions are done in light of a belief that all internal and external stakeholders (those that like you and those that don’t, those that are different in gender, identity, race, ethnicity, marital status, income, class, political leanings, education, language, religion, etc.) are of equal moral status to you. However, what we believe isn’t always what we do. It takes work to treat others, particularly those different from you, as your equal in moral status. You don’t get the right to assign their worth. The Creator has that right! Some of the key behaviors we work on when believing people are all of the same moral status as yours are respect, tolerance, fair play, just actions, inclusion, ensuring equal access to resources and opportunities, distributing resources and opportunities fairly and justly according to need. Out speech (i.e. what we say and don’t say and how we say it) should and are affected by our beliefs about equality and equity.

161 See NANOE’s Guideline booklet entitled Growth by Evaluating Services, Operations and Impacts for detailed discussion and references to resources.


Equity. Our treatment of others is fair and just. Leaders recognize differences exist that cause some people to discriminate against others so that access to resources and opportunities is not fair or just. Using fair and just processes, leaders make decisions about what others affiliated with their organization have access to and how they will be treated. A socially just workplace and service delivery is sought. People’s differences and the effects of context on them are considered in the nature and extent of resources provided to all stakeholders affiliated with the nonprofit. One’s beliefs about what they have a right to do and say about another person must include some sense of what is right and wrong to say and do to others in the workplace. If one believes every person is of the same moral status (equality), it can begin to evoke respect and tolerance of differences in person, capacity, and circumstances. Equitable treatment takes into consideration that all people are not treated fairly or justly and that some may need more resources and opportunities in order to build capacity in light of past discriminations and lack of access to resources and opportunities. Four major areas of organizational life in which equality and equity beliefs and practices are critical to the quality of the workplace were discussed: belief of equality and equitable treatment in relations, opportunities provided, participation in decisions that affect them and their work, and capacity building of people, operations, and services. Leaders are responsible for ensuring all transactions are legal, equitable and all are treated as having the same moral status. People determine what is fair and just. Because of cultural biases, all leaders must continuously review their organization’s policies, processes, services, marketing, fundraising, revenue generation strategies for areas that may be unfair and unjust.

Evaluation: a study designed and conducted to assist leaders and staff to assess the merit and worth of services, operations, products. Studies can be quantitative and qualitative but need to be robust enough to determine outcomes, impacts and value to the community as well as the effectiveness of inputs, processes and outputs.162

Fiduciaries: a person or group to whom power is entrusted for the benefit of others. All interested internal and external stakeholders place special trust, confidence, and reliance in and is influenced by the nonprofit leaders who have a fiduciary duty to act for their benefit.

Fiduciary duties: refer to the standards of conduct and management control taken or not taken by directors. Board members are the stewards of the organization and are to act collectively rather than individually. Three duties are often referenced in the law reviews. They are the duty of care, loyalty and obedience. These are defined within the text of this guideline.

Freedom: increasing all stakeholders’, including the CEO and board, access to the things they have reason to value.163 When people, including leaders, feel free, they have the power to act, speak, and think as one wants without unnecessary organizational hindrances or restraints, and in consideration of the standards set by the nonprofit’s state law on governance and established fiduciary duties of care, loyalty, and obedience. In this guideline, we discussed providing nonprofit leaders with

162 As defined in Shufflebeam, D. (2001). Evaluation models. New Directions for Evaluation, No. 89, Spring. NY, NY: Jossey-Bass, a division of John Wiley Publishing. (available on the internet) 163 Sen, A. (1999). Development as freedom. New York, NY: Anchor Book/Random House.


the freedom to share governance which is particularly the hallmark of network organizations, recognizing all leaders share the responsibility to uphold the duties of care, loyalty and obedience to the corporation’s interests and mission, and that as scale increases more local management control and governance is needed, while also maintaining fidelity of brand. Freeing the board from unnecessary governance practices and freeing the CEO to lead and manage responsively, responsibly, transparently, and effectively were discussed. Freeing all employees and volunteers to do the job they were hired or agreed to do, and evaluating them based on seeing a positive trend in accomplishing collective and individual outcomes, impacts and value to the community was another major freedom discussed.

Formal freedom is what a group can do and not do as found in organizational policies, and state and federal laws. For the most part, the state sets the governance requirements. For the most part, most states give a great deal of freedom to nonprofits in the board’s and organization’s composition, conduct, and operations.

Real freedom is what nonprofit leaders (board and staff) take control of and do, sometimes irrespective of other group’s opinions or rules of the road. The guideline cautions leaders to not make up laws that don’t exist, avoid unnecessary limitations and constraints on what and how things are done in and through the nonprofit. Leaders are encouraged to think of management as instituting processes of review of accomplishments and outcomes, rather than as control of people by placing unnecessary restraints and limitations on their work and transactions.

Franchise: the right granted by an organization to an individual or group to market its products or services in a specific territory. “One party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty, and gains (1) immediate name recognition, (2) tried and tested products, (3) standard building design and décor, (4) detailed techniques in running and promoting the business, (5) training of employees, and (6) ongoing help in promoting and upgrading of products. The franchiser gains rapid expansion of business and earnings at minimum capital outlay.164

Going To Scale: When a nonprofit goes to scale it realizes a substantial portion of the full potential of a concept or program that includes wide geographic spread; broad adoption; powerful and full program implementation; sustainability; wide recognition.165 Funders and social investment leaders also add that what is taken to scale must have significant, positive outcomes, impacts, and value to the community, region, state, nation, or internationally (depending on the geographic spread intended).

164 As retrieved at http://www.businessdictionary.com/definition/franchising.html 165 modified from Roger King’s definition, City Year.


Governance: Establishing mechanisms to balance power and control relationships, ensuring accountability through some form of operations, service, organizational and individual performance reviews, and ensuring corporate accountability in light of existing state nonprofit laws and federal reporting requirements. The essence of board and executive staff governance is to create, maintain and monitor all transactions relative to three main fiduciary responsibilities: the duty of care, loyalty, and obedience, as well as creating sufficient policies to ensure equality and equity are present in all transactions. Leader/governors also ensure required reporting standards are followed and that business transactions are in keeping with the corporation’s mission. Governors also ensure networked relationships are entered using appropriate legal protections of the corporation’s assets, income, and brand. The primary duty of governance is to enhance the prosperity and viability of the nonprofit. In networked organizations governance is shared among unit leaders, many boards, as well as with the corporate board and executives. Basic legal requirements for governance are found in each state’s nonprofit law. States differ in what is in their law but many commonalities exist. The state law usually sets a minimum requirement of governance. With the exemption of a few areas found within the Sarbanes-Oxley Act of 2002, the federal government has not enacted laws that affect governance. Some nonprofits have a great deal more governance freedoms than others do. The state with the most comprehensive nonprofit law is California (Nonprofit Integrity Act of 2004).166

Currently, the questions asked on the IRS Form 990 are used to determine if financial wrong-doing may exist and when the IRS may take a closer look at the organization. Some questions ask whether certain policies or transactions are present that may give an indication of how effective governance is related to the fiduciary duties of loyalty, care, and obedience. The questions, however, are not IRS requirements for nonprofit governance, other than you’re required to report your circumstances.

HOT Communication: A mnemonic for honest, open, two-way communication among leaders and among leaders and all internal and external stakeholders.

Impacts: What is not intended as an outcome by the program designers but what does happen as a result of an intervention (service/program). People can perceive that certain impacts will occur before something is even done. This is usually called predictive impact (assessments). The social impact investment world uses the term to define the difference in costs when the total costs of a program/service is done and the costs associated with beneficiaries changed conditions or behaviors when compared with the costs to society/communities if no services existed.167

166 Readers are encouraged to read Hopkins and Gross’ review of nonprofit laws as found in See Hopkins, B. R., & Gross, V.C. (2010). The legal framework of the nonprofit sector in the United States. In Renz, D. (Ed.). (2010). The Jossey-Bass handbook of nonprofit leadership and management. Third Edition. San Francisco, CA: Jossey-Bass, Chapter 2, pp 42-76. It is easy to read and will refresh leaders’ understandings of governance responsibilities and freedoms.167 See NANOE’s Guideline booklet entitled Growth by Evaluating Services, Operations and Impacts for detailed discussion and references to resources.


Indicators: concise statements that specify the state of affairs relative to chosen key features of a person, group, thing, or community and that are benchmarks of outcomes sought through the organization’s work. Indicators usually tell leaders the current status related to the outcomes sought. For example, if a community desires that no youth drop out of high school (outcome) they may have indicators of the dropout rates for youth by race/ethnicity; and/or that attend different high schools, or those entering high school significantly below grade level compared to those at grade level or slightly below grade level; and/or those with one or more ‘at risk’ characteristics, etc. Indicators of operations may include ratio of staff to clients, $ amount spent per client, percentage of revenue growth, cost of fundraising compared to donations received, etc.

Inurement: “none of the income or assets of a tax-exempt nonprofit may be permitted directly or indirectly to unduly benefit an individual or other person who has a close relationship with the organization, when that person is in a position to exercise a significant degree of control over the entity.”168 Tax-exempted nonprofits are to serve public interests related to its mission and not private interests. This doctrine of private inurement does NOT prohibit transactions between a tax-exempt organization and those who have a close relationship with it. The transactions are tested against a standard of reasonableness. It doesn’t prohibit payment of compensation to employees or directors, provided it is reasonable and not excessive when compared to other similar situations. Readers should check their state’s nonprofit law relative to compensation issues. The IRS asks questions on Form 990 about how revenues were use and who received compensations and at what level.

Inputs: all resources needed for services and operations to occur. Inputs may be users of services, staff, equipment, materials and supplies required, transportation, facilities, security personnel, etc. Thoughtfully determining input helps monitor resource allocations to make sure service providers have what is needed to perform the services effectively.169 Inputs are one of two things usually reported by many nonprofits in annual reports and on websites. While important and many times insufficient to accomplish mission, inputs do not tell stakeholders what resulted or efficiencies.

Interventions: the specific action taken by service providers which are thought to be the most effective and efficient way to accomplish the outcomes sought. A particular home visitation model may be referred to as an intervention or a series of critical actions may be identified that make up a service such as a nurse-family home visit protocol. The uniqueness and effectiveness of a nonprofit’s interventions are what make the nonprofit stand out among the rest. Interventions of the kind that attract social impact investors’ attention are those that are ‘evidence-based’ or ‘proven’ which means they are thoroughly evaluated for their outcomes, impacts and value.

KIPs: Key indicators of performance. This term is used by those who advocate the use of dashboards. Not all data is tracked on dashboards but rather key ones that tell decision makers what operations, business, and service performance levels are critical to achieve and maintain for growth

168 See Hopkins, B. R., & Gross, V.C. (2010). The legal framework of the nonprofit sector in the United States. In Renz, D. (Ed.). (2010). The Jossey-Bass handbook of nonprofit leadership and management. Third Edition. San Francisco, CA: Jossey-Bass, Chapter 2, pp 42-76.169 See NANOE’s Guideline booklet entitled Growth by Evaluating Services, Operations and Impacts for detailed discussion and references to resources.


and quality assurance. For example, a dashboard may be available for various decision makers of key consumer performance indicators, or service delivery performance, or inventory supply and usage, or revenue/expense flows, or CEO and board performance.170

License: a “revocable written or implied agreement by an authority or proprietor (the licensor) not to assert his or her right for a specific period and under specified conditions to prevent another party (the licensor) from engaging in certain activity that is normally forbidden (such as using copyrighted materials, trademarked names, registered processes associated under another entities brand name). Intellectual property licenses generally ensure that the licensor will not invoke ownership protection laws, if the licensed property is copied, sold, or used by the licensee. A license is not a right, because the licensor may not have the legal power to give all necessary permissions that constitute a legal right. It is also not a lease and not assignable by the licensee” 171

Management: Management aims to achieve defined goals within agreed upon timeframes. Management functions usually include setting standards, measuring actual performance and taking corrective actions. Management control processes usually include comparing a) actual vs planned performance; b) the difference between actual and planned; c) examining the causes for the differences identified; d) and taking corrective action to eliminate or minimize the difference.172

Network: a group of people and/or organizations that share resources, information, interests, opportunities, ideas, and/or work.

Networked organization. Social impact investors, business academics and authors, and consultants that talk about going to scale in the nonprofit world define networked organizations as “large direct-service organizations working under a single brand name with many branches or affiliates across the USA or world. They include a variety of multi-subsidiary legal structures, from one consolidated legal entity to federations and membership organizations made up of separate legal organizations.’173 Boys and Girls Clubs of America, World Vision, Habitat for Humanity are examples of networked organizations. Many of the top 100 nonprofits in the US are networked organizations.

170 See NANOE’s Guideline booklet entitled Growth by Evaluating Services, Operations and Impacts for detailed discussion and references to resources.171 As retrieved at http://www.businessdictionary.com/definition/license.html 172 Read more at http://www.businessdictionary.com/definition/management-control.html 173 Campbell,K., Virani, S. & Lanney,J. (2016). Network transformations: Can big nonprofits achieve big results? Stanford Social Innovation Review, March, as retrieved at https://www.bridgespan.org/insights/initiatives/transformative-scale/network-transformation-can-big-nonprofits-achieve And the University of Pennsylvania’s Wharton School article on Network revolution: Creating value through platforms, people and technology. PA, University of Pennsylvania, Wharton School, 14 Apr 2016 as retrieved from Knowledge@Wharton http://knowledge.wharton.upenn.edu/article/the-network-revolution-creating-value-through-platforms-people-and-digital-technology/ and Libert, B., Beck, M., Wind, J. (2016) The Network Imperative. Boston, MASS: Harvard Business Review Press. Also, some are referring to the phenomena surrounding networked organizations as the ‘Fourth Industrial Revolution’. See for example, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond


Operations: the processes used to deliver services and provide vital corporate functions.

Organizational structures: how people are organized into teams, departments, or work groups to perform business and service functions.

Outcomes: the specific changes intended and that occur because of the nonprofit’s services. In program design, outcomes identify the intentional changes the nonprofit seeks to make to fulfill its mission or key aspects of its mission. If more than one service provided or program package within a service, outcomes are identified for each service and each program package.174

Outputs: the tangible behavior or thing produced because of using selected inputs, engaging in strategic service delivery processes, and applying specific program/service interventions. For example, an output of a club program may be 90% of youth in the targeted areas of X community attended the club program at least 85% of the time.

Processes: all major actions that should occur to maintain service fidelity. Processes identify all key elements of service delivery connected to a given program, particularly those needed to maintain the uniqueness and espoused effectiveness of the intervention. Processes might be all people receive blood pressure checks at each visit, or home visitors make at least 10 home visits a week or all people coming to the foodbank are offered nutrition sessions, or 90% of all first time mothers in our clinic come for well-baby checks, or 80% of all eligible students in X school district receive dental exams, or 4 affordable houses are built yearly in X county, or 90% of middle school students are engaged in mentoring sessions in areas related to their below grade level competence. Thoughtfully thinking about essential processes required helps to monitor whether service providers are really doing what it is consider essential to achieve outcomes. Defining critical processes helps evaluators know what intervening process variables should be examined. Evaluators typically treat selected process variables as one category of independent variables that conceptually are thought to affect outcomes positively.175 There are also organizational processes connected to key operational features such as public relations, fundraising, governance, and accounting.

Reciprocity: Is a social exchange between two people in which one gives to another without expecting anything in return, and in turn, another gives something back also without expecting anything in return. It’s an exchange of ideas, things, experiences, etc. Reciprocity is based on the internalized belief that one should do to others what they would want done to them. It can be motivated by understandings of equity, equality, love, respect, and/or appreciation. However, if the exchange becomes one-sided, reciprocity may cease. All give and no take, or all take and no give are not reciprocal social exchanges. Reciprocal relationships help built trust. Readers were asked to consider the degree to which all leadership and management relationships are reciprocal, including the CEO-Board relationship.

174 See NANOE’s Guideline booklet entitled Growth by Evaluating Services, Operations and Impacts for detailed discussion and references to resources.175 See NANOE’s Guideline booklet entitled Growth by Evaluating Services, Operations and Impacts for detailed discussion and references to resources.


Scale: scale, when used in the term ‘going to scale’, refers the extent of the geographic spread of a brand or intervention; how broad adoption is; how powerful the adoption and effective implementation of a program/service has been; the extent of recognition within the industry; the extent of the outcomes achieved that are over and above those achieved by others doing similar things; the positive but unintended impacts that the spread has had on people and communities, particularly when compared to what similar efforts have had; and the economic value to the community, region, state, nation, other nations. Some also refer to significant increases in organizational capacity, including growth in staff, services, products, revenues, and capital so that larger spread, service adoption and implementation, industry recognition, and greater outcomes, impacts and value occur.

Social capital: the connections among individuals in social and organizational networks, and the norms of reciprocity and trustworthiness that arise from them.176

Social impact investor: a person that gives money to a nonprofit to grow the impact of the services or that gives money to an intermediary organization established to aggregate individual investors contributions and finds nonprofits with enough proven capacity and evidence of outcomes that it is considered worthy of further investment to go to scale. The social impact investment field is relatively new phenomenon. It is now a multi-billion-dollar endeavor. There are more people wanting to invest in nonprofit social enterprises than there are nonprofits that have enough capacity to qualify to receive investments.177

Stakeholders: A stakeholder is anyone affiliated with the organization that has a stake in what and how things are done, and the outcomes and impacts of what or how things are done. Internal stakeholders are people within a business or that have a formal interest in the business (e.g., employees, managers, the board of directors, investors, current donors, advisory groups, volunteers). They are under the direct management and leadership of executives. External stakeholders are people not directly affiliated or employed by a business but who care about or are affected by the nonprofit’s performance (e.g. consumers, regulators, potential investors, suppliers, an interested group that shares similar passions and interests in a cause, potential donors, other nonprofits reliant on the business’ services or resources). Nonprofit executives have no direct leadership or management authority over these individuals, but can lead and influence what they do for their organization. They can influence some to engage in joint ventures with them. A hallmark of nonprofits that have gone to scale is that they are very responsive to internal and external stakeholders. They formally seek feedback from and report to all stakeholders. Internationally, stakeholders are typically defined as “all those individuals or groups who affect, or are affected by an organization and its activities.”178

176 Slightly adapted from Robert Putnam’s definition of social capital. Putnam, R. D. (2000). Bowling Alone: The Collapse and Revival of American Community. New York: Simon & Schuster177 A key book all nonprofit leaders should read is Salamon, L. (2012). New Frontiers in Philanthropy: A guide to the new tools and actors reshaping global philanthropy and social investing. New York: NY: Oxford University Press. Also see NANOE’s Guideline entitled Growth by Increasing Capacity to Generate Revenues, Donations, and Capital for a more thorough discussion on social impact investing.178 This is how CIVICUS defines stakeholder. CIVICUS is a major international organization that seeks to equip and inform nonprofits around the world, advocates on their behalf, and seeks to establish national and international policies related to civil society development.


THINK: A mnemonic to use to judge what you (as a leader) say and don’t say, and when. Is what you are about to say true, helpful, inspiring, necessary, and kind? If not, find a better way to communicate what you have to say to others within your leadership sphere.

Trust: Trust is the belief that an individual, group or organization can be relied upon to act in a consistent, fair, rational, and expected manner.

Value: The term is used in reference to evaluations, to development of corporate value statements, and in assessments of whether or not to give a significant capital investment to a nonprofit to further its growth and impact.

When used in relationship to evaluations a ‘value’ is the worth, merit or importance of something that a person uses to judge a situation. All organizations, as well as all individuals within an organization, behave based on their values. Values guide behavior. External stakeholders, such as funders and donors, have a value system by which they judge your organization, staff and board. When used mathematically, a value is a number assigned to a measurement which indicates kind, amount, significance, association, and/or effect size.

Many nonprofits create core values statements which define the central norms considered as good behavior and how they will conduct their business. A nonprofit’s stated values can be different from their operating values. When different, employees and volunteers usually adapt to the operating values, voice complaint, or leave if their personal value system is dissonant with the nonprofit’s operating values.

When social impact investors use the term “value to the community” they usually mean what the economic value is when an intervention is compared with other similar interventions that already exist. Some authors use the term ‘impact’ while others refer to ‘value to the community’. Furthermore, there is a determination of whether the intervention’s outcomes and impacts are greater than what already exists or where no intervention is present. Is the impact greater than what is currently provided? Are the costs lower, or if higher, worth it and why? Is there a significant positive effect when compared to places in which no intervention was introduced? While the primary value evaluated is its economic value to a geographic area, positive individual development and social effects are also considered.


APPENDIX CMISLEADING VIEWS OF EQUALITY OF EQUITY

Various nonprofits have modified and re-defined equality and equity using Craig Froehle’s original illustration179 which visualized what belief differences were held by ‘conservatives’ and ‘liberals’ regarding resource allocations. Unfortunately, as his original illustration spread rapidly over the internet and the working definitions of equality and equity used by many leaders in the nonprofit sector changed.

Equality is now viewed as ‘wrong thinking’ and equity is ‘right thinking’. While the meaning of both terms is different, equality and equity were re-defined to be different ways to think about the same thing. Equality was then pitted against a definition of equity, as if they were about the same thing, when they are related but different concepts. Equality was redefined as thinking that the same kind and amount of resources should be distributed to everyone, irrespective of their differences. Equity was redefined as fair and just distribution of resources, considering differences. Both redefinitions confuse people.

Many other images, besides the sampling found in this appendix, are available on the web. Mr. Froehle’s original illustration has been used, adapted, modified or re-purposed by foundations, funders, journalists, religious groups, city government officers, classroom teachers, health associations, feminist authors, The Association of Colleges and Universities, regional and city government offices and councils, national UN groups, literacy programs to name just a few! A significant number of nonprofit sector leaders now view equality as something bad and wrong!These re-definitions fundamentally destroy leaders understanding how their beliefs and attitudes about equality affect their treatments (equity) of each other and all their stakeholders. It affects beliefs and attitudes and, ultimately may affect leader and staff behavior. The basis for treating people fairly and justly is believing that everyone has the same moral status. Take that away and society has a very different basis to determine how they justify their treatment of others. Rather than ‘do to others as you would have done to you’, it becomes ‘do to others as you think their value is relative to yours’!

179 See Craig’s blog at https://medium.com/@CRA1G/the-evolution-of-an-accidental-meme-ddc4e139e0e4


Craig Froehle’s original drawing about beliefs regarding resource allocations

The rest are all modifications, adaptions, re-definitions of Froehle’s original drawing









HARNESSING THE POWER OFDIFFERENTIATED RELATIONSHIPS

AUTHORKathleen K. Robinson, Ph.D., CNE, CDE, CNC

PHONE: (803) 808-5084EMAIL: [email protected]

During her forty-five-year career, Dr. Robinson worked in development of community and regional support systems for at risk families, children and youth organizations, community-

based literacy systems, holistic family centers and nonprofit human services organizations. In addition, her focus has been on systems-based approaches to community planning and policy development and social impact assessments of various community change projects.

During her fifty-year career, Dr. Robinson worked in community and regional support systems development for at-risk families, children and youth organizations, community-based literacy systems, holistic family centers and nonprofit human services organizations. In addition, her focus has been on systems-based approaches to community planning and policy development, and social impact assessments of various community change projects. Her expertise is rural, integrated community development.

Dr. Robinson previously served as Director of the Center on Neighborhood Development and the Director of the Center on Nonprofit Leadership within the Institute on Families and Neighborhood Life at Clemson University (1998-2009). She also co-lead in the development of the Institute’s PHD program in International Family and Community Studies.

Prior to her work at Clemson University, she was Associate Director and Research Professor at the Institute for Families in Society and Director of the Division on Neighborhood Development at the University of South Carolina (1995-1998). From 1981-1995, she was a tenured Assistant and Associate Professor in the College of Agriculture and Human Resources (Department of Human Resources), an Associate Professor in the College of Social Sciences (Department of Urban and Regional Planning), and Research Associate in the Center on Youth Development at the University of Hawaii at Manoa. In 1977, she and her husband moved to Hawaii where she was a Research Associate in the Culture Learning Institute at the East-West Center (1978-1981) before joining the UHM faculty. From 1975-1978, she was a senior graduate assistant and Research Associate in


the Nonformal Education Institute at Michigan State University working on a multi-million dollar USAID project in Indonesia to enhance the nation’s teacher training college system to include, among other things, an emphasis on community development initiatives. In addition, she served as Vice President of Program and Publications for Pioneer Girls, a faith-based, interdenominational, international girls club, camp and women’s leadership development program (1970-1975). From 1967-1970, she was a graduate assistant in the College of Education at Texas Women’s University working on marine biology science curriculums for inland schools, and a science teacher in the Denton Texas public school system. While studying at Moody Bible Institute, she founded and directed an out of school child and teen development and literacy center in two housing projects in Chicago, as well as founding and hosting a radio program at WMBI (1964-1970).

Dr. Robinson testified several times before the U.S. Congress, several states’ legislative bodies, and the United Nations. She served as a consultant to numerous state social service, health, juvenile justice, governors’ offices, environmental, and municipal agencies. Internationally she was a consultant to 28 international organizations, including several divisions of the United Nations, the U.S. Agency for International Development, the International Institute for Applied Systems Analysis, ASEAN and the All Union (USSR) Academy of Sciences, Asian Development Bank, Asian Institute for Technology, Australian Commonwealth’s Scientific and Industrial Research Organization, Canadian International Development Agency, Chulalongkorn University Social Research Institute, European Centre For Social Welfare Policy and Research, the German Development Bank, German Ministry of Education, Indonesian Ministry of Education and Culture, and the U.S. Peace Corps.

She has received numerous awards and recognitions from her work, including several fellowships and an Award of Distinction from the National Association of State Universities and Land Grant Colleges for her leadership of a national task group to add new science understanding to what was offered through schools and colleges of Agriculture and Natural Resources across the U.S. She was awarded the University of Hawaii Regents’ Medal for Excellence in Teaching in 1990, the highest award given at UHM. She also has received awards of distinction from the U.S. Peace Corps and USDA for her community development work. At the University of South Carolina, she was recognized for her contributions to research productivity, and received three faculty excellence awards while at Clemson University. Texas Woman’s University honored her in 2015 with the Chancellor’s Alumni Excellence Award and, that same year, the National Development Institute awarded her their 25th anniversary Nonprofit Leadership Award. In 2017, the National Association of Nonprofit Executives and Organizations honored her with their first Robinson Lifetime Achievement Award. She received letters of commendation from three states’ governors for her work in enhancing various aspects of human service delivery systems. Having traveled and worked in 151 countries, she is a recognized leader in rural community development in a variety of national and cultural contexts.

She retired in 2009 from Clemson University but remains affiliated with the Institute as an Adjunct Professor. Since her retirement, she has remained active in leadership roles within two charter schools, National Development Institute and the National Association of Nonprofit Organizations & Executives. She currently lives in Pawleys Island, South Carolina.


HARNESSING THE POWER OFDIFFERENTIATED RELATIONSHIPS

EDITORJames P. LaRose, D.P., CNE, CDE, CNC PHONE: (803) 808-5084 EMAIL: [email protected]

Jimmy LaRose’s passion for “people who give” has inspired philanthropists around the world to change the way they invest in nonprofits. His belief that donors are uniquely positioned

to give charities what they truly need – leadership rather than money – is the basis for his work with individuals, governments, corporations and foundations, in the U.S., Europe, Asia & Middle East. Jimmy, in his role as author, speaker, corporate CEO & nonprofit CEO champions all of civil society’s vital causes by facilitating acts of benevolence that bring healing to humanity and advance our common good.

Now, in his twenty-seventh year of service, his message that money is more important than mission and donors are more important than people or causes has resonated with policy institute scholars, social activists, doctoral students, business leaders, think tanks, nonprofit and NGO executives who rely on him and his team of veterans to meaningfully grow their charitable enterprise.

He’s the author of RE-IMAGINING PHILANTHROPY: Charities Need Your Mind More Than Your Money™ written to philanthropists who give nonprofits what they really need...enterprise models that grow capacity and achieve financial sustainability. https://JimmyLaRose.com

He’s the architect of the Major Gifts Ramp-Up™ Donor Cultivation Model & Online Cloud used by charities around the world to meet the needs of their primary customers…the advocates, donors and volunteers who financially underwrite their mission. https://MajorGiftsRampUp.com

He’s the founder of National Development Institute™, a 501(c)3 public benefit charity established in 1990 that insures funders, granting organizations and corporations safeguard their mission by building capacity within charities who serve the human welfare, education, health care, arts & environmental sectors. https://NonprofitConferences.org

He’s the founder of National Association of Nonprofit Organizations & Executives (NANOE) our Nation’s only unifying legislative body comprised of Governors nominated from all 50 States who oversee the codification of guidelines that govern sound charitable practice. https://NANOE.org


He’s the designer of the CNE, CDE & CNC™ Credentialing Program providing practitioners the training and certification they require to lead nonprofits to greater success. https://NANOE.org

He’s the inventor of DonorScope™ an online prospect research platform used by charities to identify donors who give big gifts to great dreams that are backed by sound plans. https://DonorScope.com

He’s the founder of 501c3.Buzz™ an online forum moderated by a nationwide network of academicians, practitioners & consultants who have dedicated their lives to advance the common good. https://501c3.Buzz

Finally, Jimmy is the CEO of both Development Systems International™ and PAX Global™ firms that specialize in implementing the Major Gifts Ramp-Up Model for nonprofits, ministries and churches who raise major gifts. https://Development.net & https://PAXglobal.com

James P. LaRose has served as a specialist with the U.S. State Department’s Speakers Bureau traveling the world working with embassies, foreign governments, and leaders to promote philanthropy and civil society in developing countries. He was the founding President of the Western Maryland Chapter of the Association of Fundraising Professionals (AFP), and is a graduate of AFP’s Faculty Training Academy (FTA). He is a graduate of Indiana University’s Executive Leadership Program, Indianapolis, IN, the National Planned Giving Institute, Memphis, TN, Tennessee Temple University, Chattanooga, TN and Word of Life Bible Institute, Schroon Lake, NY. Dr. LaRose received his Doctorate in Philanthropic Studies from Ecumenical University. Rev. LaRose was ordained as minister of the gospel by the Ecumenical Church of Christ in further support of his service to the hurting and hopeless around the world. He and his beautiful wife Kristi are citizens of the Palmetto State where they make their home in Lexington, South Carolina.


712 H STREET NE SUITE 1149 | WASHINGTON, D.C. 20002

(800) 257-6670 | NANOE.org

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