Monday, October 31, 2005

Why Nonprofits Fail

This book was the most useful book I've read in a long time. It is definitely not your typical business fluff, but has some ideas that you could use as tools to really turn around a small, struggling nonprofit. I have even been plugging it to others and my boss came and saw it on my desk and we had a meaningful discussion around the points it brings up. Basically, it's a lot of organizational behavior type stuff applied to small nonprofits instead of the huge hulking corporations we usually read about. Now, I firmly believe that principles that are used to advantage in large corporations can be put to work in tiny organizations as well, however, I've found it's a) hard to convince people that the theories used by corporations b) hard to fully adapt all those theories and feel like you're still doing it right. So this book was great because no adaptation is required.

A quote from the beginning of the book is "uncontolled change [the reason nonprofits fail] is a consequence of nonprofit managers' inability to resolve problems effectively, whether the problems are between individuals, teams, departments or organizations." So, whether you define managers as staff or board, problems need to be addressed and resolved in order for them not to become bigger problems.

On page 25, there is a list of steps to resolving association problems that do not usually respond to usual methods:

1. Gather the facts about the problem that could not be resolved through the standard (first-order) approach.
2. Disclose the beliefs that guided the intervention that did not work in this situation.
3. Select one or more theories to use as a lens to examine the issues.
4. Come up with a hypothesis that will guide planned change.
5. Devise an alternative intervention strategy based on the hypothesis (this is known as a 2nd-order approach)
6. Implement the new strategy.
7. Evaluate the results.
8. If the problem remains unresolved, repeat the steps.

So this is kind of like the scientific method, only applied to a sociological, and then an organizational context. Parts of the book get very psychologically oriented, which was interesting to see. The author takes a pretty clinical approach to problems of the small nonprofit organization, and helps the reader "diagnose" his/her organization's problems by using different symptoms which are "presenting."

He talks a lot about 1st-order and 2nd-order solutions to problems and says that people keep trying 1st-order solutions and wonder why their efforts fail. They should try a 2nd order approach, which can involve "reframing" the problem or the question at hand. First-order approaches are idealized and focus on the "why" of the situation. Second-order approaches focus on a more concrete target to seek for and attain.

One example of this concerns the problem of board members being negligent in meeting attendance. You can say everyone has to come to the meeting or they are neglecting their duty, or, you can decide that what you really want is for them to be engaged, and therefore, it's acceptable for them to participate via telephone calls.

Part II really gets into the guts of his theories of nonprofit dysfunction. It's called "Seven tough problems and how to solve them."

1. Recruitment Disorientation. Basically, this problem results in an ineffective board. No one has ever trained the board members or been informed of what the organization expects out of them. It causes board members to exhibit "problematic behaviors."

A useful list I found in this chapter concerned what the E.D. example expected his board to do. He expected them to:

- help solve board problems
- represent the organization in the community
- develop and use important contacts
- help raise money
- serve on committees

I thought the list was instructive. So does the author. The problem is that no one ever put it to the board that way. So I take the point.

Recruitment disorientation can "present as" the following things:

- inconsistent commitment to tasks
- spotty attendance at board or committee meetings
- limited or no follow-through on assignments
- limited or no involvement in organizational events
- avoidance of fundraising and making no financial contribution to the organization

So, the author concludes that it's best to prevent such situations by prevention (I would guess that's during the recruitment phase of the board) and the use of best practices (again, I would guess that would be things like good board/volunteer management principles).

He also asks if perhaps the E.D.'s expectations aren't too high for the board members. Always good to look at one's expectations when grappling with these problems I think. I always ask myself/others what would (name an ideal situation) look like. I know I sound like a one-trick pony, but usually I get good results out of thinking that way.

2. Cultural Depression in nonprofit organizations. Culture can build people or destroy them. Cultural Depression creates a toxic work environment. I think that most people who've had more than a couple of jobs (or even less!) can identify with this. Block posits that the main symptom of cultural depression is staff turnover, which I can easily agree with. Another symptom that I've observed is that staff too are depressed (or at the very least unenthusiastic about their work).

3. Political Performance. This means that people are not in it for the organization, or for the greater good, or for the betterment of humanity, but they're in it for #1. In my limited experience, I think is really different in a human service environment versus a trade association. In a trade association, the good that service to the organization does for one's career is readily acknowledged. In a human service organization people have weirder reasons for wanting to be involved. My boss gave me an example of this I hadn't thought of. It's like when you have a patient advocacy organization where a patient's primary reason for involvment is say, access to the top researchers in the disease, or access to pharmaceutical industry resources. It happens a lot. Once I was in a seminar and a guy put it as "nonprofit empire building." But I think anyone who's around a little knows what that is. The examples in the book focus on staff issues: "When nonprofit managers exhibit political performance behaviors, they usually target individuals in subordinate positions." One takeaway for me came from an example he used where an employee had a difficult boss. The employee finally asked to have a meeting with her boss and the E.D. I think that's a good, honest example of an approach to that situation probably most people face all the time.

Mentions the book, "The Empowered Manager" by Peter Block.

4. Role Confusion. A very relevant problem to my organization. It is "an HR managment problem where there is a breakdown in the process of communicating task assignments and responsibilities and clarifying work and performance expectations. Communication breakdown is typically associated with receiving too little, too much, or contradictory information about one's role in the organization."


How do we ensure that volunteers are oriented to their roles and responsibilities?
How do we ensure that they are satisfied and productive?
How can we ensure that differences of opinion between self and outside organization be resolved in the best way?

The board should learn:

How to delegate assignments
Adhere to rules
Structure meetings and deadlines
Establish ground rules for meetings, decisionmaking, and leadership

The board should develop process maps for:

Dealing with disagreements
Conflict resolution
Researching information
Policy decisions

5. Financial Misfortune. This happens when the board or a manager puts finances in a subordinate role to something else. Even if there are not immediate problems, the author states it's a sign of problems to come. Signs include: bouncing checks, not paying invoices on time, double-paying.

Useful quote: "Executive directors are not expected to be as knowledgable as accountants, but they are expected to have a strong working ability to develop and use organizational budgets. They are also expected to be able to read financial statements and know how to compare the organization's actual spending to the budgeted amount for each fiscal year. Nonprofit managers are also expected to understand certain rules of sound financial management and ensure that the organization complies with all of its legal reporting responsibilities."

6. Fundphobia. Fear of raising money, obviously.

Steps development directors follow:

- Identify a prospective giver
- Cultivate the relationship
- Present a stirring case about the nonprofit and its services
- Invite person to make a gift

Page 178, problem-solving model:

- Define the problem
- Identify the important ingredients of the situation and what is important to the decision maker
- Weigh the pros and cons
- Determine if alternative solutions exists
- Prioritize the solutions
- Select the decision choice, based on the likelihood of achieving the results

S0 anyway, I liked the book so much I found myself thinking I would like a bibliography to do some follow-up reading. So I was glad when I found one at the end.

By Stephen R. Block
ISBN # 0787964093