Who Needs A Crisis? - Spencer

I loathe a crisis. They really suck and should be avoided. I recently read a scholarly article penned by Wendy Reid and Johanne Turbide and entitled, Board/Staff Relationships in a Growth Crisis: Implications for Nonprofit Governance. I have a few thoughts on the matter.. (Boy, do I have some thoughts…) First, I’ll briefly sum up the research and findings: Their work sought to examine the relationship between NPO Boards and management during “crisis” periods of the organization, focusing on changes in the relationships during that time. They studied four NPOs which each encountered a period of significant fiscal stress and subsequently sought a “bailout” from the government entities which provided the majority of funding for their programs. Two NPOs were museums and the others were focused on the performing arts. Their findings indicated that organizations in transitional chaos went through three stages: 1) Board members were disconnected and placed a high degree of trust in management. A fiscal emergency then occurred. 2) Reacting to the fiscal emergency, the board closed ranks and engaged in behavior which exhibited distrust of management. 3) The board settled into a relationship with management which could be described as, “I’m pretty sure I trust you, but I’d like to see the numbers anyway.”

Again, I have enough thoughts on the matter to fill a mid-sized lay text-book chapter. As this is a blog, I’ll stick to the basics. My main reaction is that it always comes back to trust. Trust is the cornerstone, no, the lynchpin of governance. Break it, and it may take a generation to restore. So how do we achieve and - more importantly - perpetuate trust between the board and management? Let me clarify that – Trust of management by the board. I maintain that this can be accomplished in the following manner (from a CEO standpoint):

1) Tell the truth, the whole truth and nothing but the truth. In all the cases examined by Reid and Turbide, the stormy seas were precipitated by a CEO which either withheld or ignored the cold, hard truth that the organization was under fiscal duress. On multiple occasions in their work, the authors referenced “whistle-blowers”. When we get to “whistle-blower” status, we have a problem in the Houston sort of way. Rather, we have had a problem for some time that the CEO either knew or should have known about and failed to report to the board.

2) Put it (get it) in writing. Trust is a whole lot easier if the board is looking at the numbers on a piece of paper. Backing up, it’s a whole lot easier for the board to find itself looking at the numbers on a piece of paper if another piece of paper says that numbers should be written on a piece of paper. Bottom line – Bylaws or policy should require regular (not annual) financial reporting by the CEO to the board.

3) Lose the thin skin – In the CEO world, whiners (nor wieners – sorry – had to throw that in) need not apply. Telling the truth, the whole truth and nothing but the truth is not always easy. One had better be prepared to answer the resultant tough questions. The board can’t assist in solving the problem if members are unaware of its existence. Be OK with being monitored and judged. It’s like any other job.

4) Be prepared with a plan. If a crisis looms, know that you were in charge when the crap got thrown into the path of the fan. You’d better have a couple of rolls of paper towels handy. Lay it out for the board and everybody roll the sleeves up.

I may have gotten a little off track here, but dammit, what kind of NPOs were the authors studying? In my opinion, they were exceedingly dysfunctional to start with. The CEOs appeared to enjoy rock star status before they ran the ship aground, the whistle blew and trust disintegrated. Whose fault is this? The Board? The CEO? I think that blame lies with both. The authors discuss a cyclic nature of CEO/Board relationship, which starts with CEO rock star, shifts to CEO vagrant and then settles into average-Joe-manager with a bevy of bosses. Why not just set it up right to start with (see steps 1 – 4 ) and then through diligence and adherence to policy, avoid the crisis altogether? Like I said, crisises really suck.

Reference:

Reid, Wendy and Turbide, Johanne. Board/Staff Relationships in a Growth Crisis: Implications for Nonprofit Governance. Lessons for Successful Nonprofit Governance. Nonprofit and Voluntary Sector Quarterly. Published online – 3/7/2011.