Kaiser: The Board Must Allow Itself to be Restructured

This week we are considering Rule #9 from Michael Kaiser’s 2008 book The Art of the Turnaround. You will find it more meaningful, however, if you think of it as Rule 8-B since the primary focus of his comments about an organization’s board of directors is essentially a further exposition on courting major donors as discussed in last week’s message. There he touched on the limitations of asking others to make those huge, life-saving gifts when the members of the board fail to lead by example, contributing little to an entity’s financial health. Kaiser’s solution is kindly offered, masking a ruthless but potentially potent way to resolve the dilemma of nice people driving the organization to a near death experience.

Rule No 9 states: The board must allow itself to be restructured.

This is the one time I have to say he is being disingenuous in his advice. People accept board seats for various reasons but they remain firmly implanted occupants of those seats for only one, they like the view from the top. So to express Rule #9 as a passive acceptance of being restructured (aka replaced) is a gross misnomer. The best board members, the ones you desperately want to keep, will voluntarily leave once they believe they have done all they can for the benefit of the organization. Everyone else remains entrenched and it takes a very stout prying tool, usually wielded by the executive director, to displace them.

This is not meant to be a cruel maneuver to get rid of people you personally don’t like. But it is needed and you can appreciate its relevance for reviving the financial wellbeing of any organization when you read the advice of someone with the experience of a Michael Kaiser, who says of board governance and its impact on fund raising that “Boards provide a vital underpinning to the fund-raising success of most arts organizations, especially with individual and corporate donors.”

This underpinning consists of influence among one’s peers. The basic assumption is that affluent people attract more of their own kind to participate in a cause they, themselves, enjoy and support. It builds on a fundamental premise in fund raising that people give to people, not the cause for its own sake. The bonus comes in the fact that people give more to the people they know. Therefore if your board of directors is comprised of people with wealth and influence they will be likely to attract others of their own kind, who you as a lowly executive or development director would otherwise never meet.

And now for the application where the board seats are full of those kind people giving little, while the organization drifts towards disaster. Kaiser writes of his experience at the Alvin Ailey dance company, where the average board gift was less than $500 per year for a $1.7million budget: “When we imposed a giving requirement of $10,000 [per year] we lost half of our board members, but we were able to replace them with people who could support the organization in the way that was required. These new board members also introduced new contacts and new energy to the organization. They were not weighed down by pessimism and exhaustion.”

For Kaiser, the pry bar used to extricate people from their entrenched positions as board members was the implementation of a substantial giving requirement, one which more accurately reflected the financial needs of the company. The result is that people chose to leave rather than be accountable to that standard. This act of tough love is what “allowed” Kaiser to restructure his board in keeping with his Rule #9. “We got rid of the dead weight, hired new members, gave a clear orientation, were explicit about our needs, created a workable plan, helped our board members raise funds, and did the marketing and programming that made them excited to participate. The new board members also spurred the senior members to greater involvement.”

You can see now why I suggested at the outset that this week’s lesson is an extension of Kaiser’s Rule #8 and the need to raise sizeable donations in a short period of time (less than three years by his reckoning) in order to save the organization. This link between the two rules reveals a point which most non-profit consultants are averse to so freely and openly state as Kaiser does in his book; a primary function of the directors is to give and get financial capital for the entity they serve. My own board principle (since I am too shy to use the word rule as Kaiser does) is that it is the primary responsibility of directors to fund their decisions. It is easy to sit in a board room and pontificate about what needs to be done, when you will not be the one to break a sweat to insure an idea’s execution or to open up your own pocketbook to pay the expenses for those who do. Pontification is simply a grand way of illustrating the fact that words are cheap. They don’t get the job done. Money speaks more efficiently and effectively and it is the job of the board members to make sure the message is clearly stated.

For the sake of full disclosure, however, my own word of caution based on experience is to remind everyone that board members make up their own rules of engagement. Getting them to approve a minimum giving policy of adequate proportions is no easy task as Kaiser’s brief account might indicate. The complaint I encountered the first time I merely mentioned implementing a standard for every board member making an annual cash gift of any amount was that I was forcing them to “buy” their board seats. How cruel of me to do so. But even that suggestion was effective in making a few more places at the table available to others. One offended board member soon resigned and two more opted not to seek re-election when their terms expired. I was never brazen (or maybe that should be brave) enough to set a minimum dollar limit on an individual’s annual contribution, but you will find this standard to be an understood if not explicitly stated guideline in the most successful non-profits in the country. And Kaiser’s $10K figure is a modest one. The play with the big kids, six figure contributions are the norm.

One more thing: vacancies do not automatically get filled with better qualified people, so it is appropriate for me to close this week’s message with the admonition that you strongly heed the example Kaiser described about what follows saying good-bye to the dead weight plaguing your organization. Evidence of all of his rules can be seen coming together to forge a more perfect union of management, directors, and staff to achieve his goal of great programming marketed well. My own principal is that it is all of one piece. We’ve been discussing each rule independently, but in truth they can only function effectively in unison with one another, as Kaiser will explain with his Rule #10.

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