Optimizing Non-Profits

For some years I was a member of the board of a large performing arts organization. During my time on the board, I was a member and chair of the finance committee, chair of the development committee, and eventually served a term as chairman of the board of the organization. When I joined the board, there was an ineffectual board of trustees made up of over 150 financial supporters, many of whom were septuagenarians and octogenarians, and no longer involved with the company on a regular basis. The longstanding general director of the organization controlled the programming, administration, and finance functions of the organization, and the executive committee was more of an ad hoc group of senior board members which provided advice to the general director when asked. The organization, especially during times of economic downturn, was whipsawed by unilateral spending decisions made by the director who chafed at any oversight. 

During this time, as a member and subsequent chair of the finance committee, I could see a slow motion trainwreck, made worse by the volatility in the economy and the then director’s drive to expand programming, add staff, and focus solely on productions that may have been artistically significant, but didn’t put backsides in seats for the productions. Even though we were threatened with negative cashflow requiring cash infusions from the endowment and frantic fundraising, it was very difficult to get management to focus on any issue besides the art itself. Finally, under pressure, the general director left for another opportunity, and we brought in a new general director who was open to optimization of the organization. The first steps we undertook was a budgeting and reporting protocol that included a delegation of authority and multiple approvals for not only the budget, but spending outside of the budget. Over the next several years after I rose to chairman of the board, we reorganized the governance structure of the company. To add to the urgency, we were in the middle of another serious economic downturn, so there was strong motivation to optimize the organization. At the same time, my real job was as CEO of a large energy company, so I was able to bring to bear resources to help us optimize the company.

The plan we developed involved shrinking the board and strengthening it with highly qualified directors who agreed to a substantial annual personal financial commitment as well as bringing their corporate experience to bear. Senior Directors were designated to act as an executive committee. New committees were established with qualified chairs to cover finance, governance, development, program, community outreach, and other vital functions of the company. These committees were also used to identify and recruit future directors of the board. More importantly, the new board and committees were given authority of actual oversight of the company’s artistic and financial operations with regular reporting required by management to the various committees and the board itself.

One of the key changes I oversaw during this time was the difficult task of splitting the general director’s position into its two functions, administrative and artistic. Other artistic organizations around the country had begun taking this step, and I believed it was time for our company to do the same. Splitting these two functions accomplished several goals; first, it made it more straightforward to recruit for these positions as there are not many candidates who have both extensive artistic and management experience. Second, the finances of the company were not as at risk as when one person made both the financial decisions and artistic programming decisions, as both sides of the organization were required to come to consensus on programming and how to pay for it. Third, splitting these functions freed up each of the persons in these positions to devote more time to exclusively focus on their individual skill sets. Lastly, splitting these functions reduced, and in some cases eliminated, the whipsawing of the organization that occurred when one person was in charge.

Our last, and largest, obstacle for these organizational changes was a required vote of the existing board to approve the plan. Essentially, we were asking the legacy board to approve removing themselves from the board after years of service, so we established a board of “advisors” that legacy members could join; as well, we did months of one-on-one communication of the benefits of the new plan. These two efforts worked, and the plan was overwhelmingly approved at the next board meeting. In the ensuing months the company immediately began to experience improved performance and stability.

Non-profit organizations must be organized and managed with the same duty of care and professional standards as for-profit corporations. The only way this can be accomplished is by the support and involvement of philanthropically inclined individuals from the corporate sector. Our volunteer commitment to philanthropy sets up non-profits for success, also freeing up valuable funding to go directly to the missions these organizations were established to accomplish. You can support non-profit efforts with not only your generous contributions, but also with your experience as an executive.