Challenges of an Interim Executive Director

Several weeks ago I had the pleasure of being interviewed by Kirsten Bullock for her Nonprofit Leaders Network podcast. The conversation turned quickly to my experiences over the years as an Interim Executive Director.

Whether your organization is thinking of using an Interim ED, or whether you are a consultant thinking of getting into this sort of work, I hope you will find some advice in this conversation that will help you navigate the relationship successfully.

We talked about staff and board relationships, priority setting, advice gathering, communications, self-care, and the million other considerations to think about when entering into an Interim situation.

Kirsten asked great questions, and the time on the phone with her passed quickly. And she sent me a nice box of cookies when it was all over.

You can listen to our interview, as well as other great podcasts, at the Nonprofit Leaders Network website.

Top Three Takeaways from the Nonprofit Overhead Challenge

If you're not already talking about overhead, you should be, and you will be soon. Overhead, of course, is shorthand for what nonprofits spend on general management and oversight, fundraising, and membership development. In other words, anything that isn't directly mission-related programming.

Seems pretty basic, but there are often fuzzy lines between what we consider "overhead" and what we consider "programming" - a line that is not only fuzzy, but politically charged as more and more donors (individuals as well as foundations and government) are looking at our overhead-to-programming ratio as a means of judging our "worthiness."

Last Friday, I attended Stronger Together, a conference produced in collaboration by CalNonprofits, CompassPoint Nonprofit Services, and Nonprofits' Insurance Alliance of California (NIAC). Among the sessions I attended was The Nonprofit Overhead Challenge: Action Lab for Change, moderated by Jeanne Bell, CEO of CompassPoint, and paneled by Jan Masaoka, CEO of CalNonprofits, Hydeh Ghaffari, Partner, DZH Phillips, and Ann Goggins Gregory, COO of Habitat for Humanity Greater San Francisco. Here are my top three takeaways from the session:

1 - Hydeh Ghaffari: "The organizations showing 6% are playing with the numbers and the ones showing 60% need technical assistance."

Nonprofits have to educate themselves, and their staffs, about what qualifies as program, and what gets lumped in with overhead. Don't be afraid of asking your staff to complete more detailed timecards that accurately track how much time they spend in each program area, and when they are doing "general" or "oversight" work.

Learn what your true ratio is, understand it, and embrace it. You can't use a single rule-of-thumb ("14%!") to determine if your overhead is too high or too low. You need to understand the true cost of running your organization, and be able to defend when spending more on overhead is necessary to achieve growth and deliver on your mission.

2 - Ann Goggins Gregory: "Be willing to walk away from grants and contracts that have egregious reporting requirements and too strict limits on overhead. And share that reason, respectfully, with the funder."

A hard lesson - walking away from money on the table - but as a consultant I can attest to seeing many of my clients nearly ruined by contracts that cost more to administer than they were worth. Once you know what your true overhead costs are, be honest about them with your funders. If you need to subsidize a contract with other donations that cover the overhead, that's entirely fine and your choice, but you do yourself (and all of us) a dis-favor when you cover that up.

Remember, any contract that includes any Federal money (even when passed through your local municipality) has to include at least 10% for overhead. Is that enough? Consider that most service businesses run about 30-35% for their overhead.

3 - Jan Masaoka: This is important because there have been repeated attempts to pass laws saying too much overhead means a loss of nonprofit status.

In several state legislatures there have been moves (some more successful than others) to determine whether to limit tax-exempt status only to those organizations that have a low overhead. Whether or not your state has already discussed this or not, this is not a conversation that is going to go away anytime soon.

We cannot be afraid to talk to our legislators about why this is a bad idea, why overhead ratios are not the ultimate measure of a nonprofit's worthiness, and why ratios differ from nonprofit to nonprofit based on a number of factors. If we fail to act now to educate the public and the politicians, we risk losing our nonprofit status, and with it, our ability to achieve our missions.

Coincidentally, last week another collaboration was also bringing attention to the issue of overhead. GuideStar, BBB Wise Giving Alliance, and Charity Navigator released a public letter as part of their Overhead Myth campaign.

The members of the panel I attended Friday had mixed feelings about this. Many in the sector believe that the uber-focus on overhead is largely a creation of these organizations and their systems of ratings for nonprofits (particularly Charity Navigator). Jan was the most blunt, saying, "It's like the Gap saying 'Clothes don't matter, it's what's on the inside that counts'."

Jan is my former employer and a long-time associate and friend, but I'm a little more moderate in my criticism. I don't believe that they ever meant for overhead to become the single-most important measure of what nonprofits deserve funding. Still, it is undeniable that that is exactly what has happened. A study released today by the BBB Wise Giving Alliance found that "donors care more about how money is spent than results."

I have been in contact with the folks at GuideStar, offering this space for a guest blog from them about the Overhead Myth campaign. Hopefully we can present that soon, and continue this open dialogue.

Trash Your Management Style

As regular readers of this blog probably know, I do a lot of Interim Executive Director jobs. Basically, an organization that is in a transition period between chief executives brings a consultant, such as myself, in as a temporary leader to help them through tough period, be it a merger, or a financial crisis, or just a pause to strategize between EDs.

Recently I was having a meeting with the board leadership of an organization that is considering hiring an Interim ED, and one of the questions they asked me was, "What is your management style?"

That's a typical and harmless enough interview question, but I always wonder how other people answer it. Do the micro-managers actually admit to enjoying looking over the shoulders of their staff as they work? Do the hands-off people really sit there and say, "I just trust that staff is performing"? I've seen many "experts" give the advice that you should answer this question to match the company's style (if they're command and control, you be too).

But my answer is usually more zen-like: my style is to have no style. Or, rather, the manner in which I prefer to manage is a far distant runner-up to the manner in which the employee needs to be managed.

For an example, let's take two of the senior managers who reported to me in my last interim assignment. Both highly intelligent and extremely capable, creative, and motivated. But very different people with very different needs.

One was new to her position and was still very fresh out of college. While she was full of great ideas and eager to implement them, she was also uncertain in some situations and in need of a mentor. She felt best knowing that we had a set weekly meeting where she could go over her plan for the week and get any input she needed. Of course, if she had questions in between, she'd also be welcome to pop into my office and go over any pending issues, and I'd also casually check in with her as we went about our week.

On the other end of the spectrum was the manager who'd been in her job for about a decade. Still loving her job and always excited about new ways to improve services, but very comfortable in how to go about it. For her, having a regular meeting scheduled (yet another meeting!) with no set agenda other than "what are you up to this week?" would be an unpleasant distraction. As long as she know she could come to me with questions or issues as they came up, that was enough.

Of course, some people prefer to be left alone, but really need supervision... but I'll save those stories for another posting. The idea is that the best "management style" is to be able to put your own preferences aside and find the best approach for any individual employee and situation.

At least, that's been my experience. How about you?

Continuous Improvement for Nonprofits

From Guest Blogger: Brian Leitten. Mr. Leitten is an experienced non-profit leader and consultant, chief executive and attorney.  He provides consulting services nationally to non-profit leaders from his office in Port Orange, Florida.  He can be reached at Leitten Consulting - consulting.leitten.com.

Non-profits need to practice the principles and techniques of continuous improvement (CI).  Better yet, they need to make CI part of the fabric of their organizations.

At its essence, CI is a repeatable process for improving processes.  While CI was principally developed in the for-profit world, it has broad application for non-profits.  Every operation is and will remain a collection of regularly repeated processes.  CI embraces the philosophy that those processes are ripe for improvement, even if they have been improved in the past.  Practically speaking, I’ve never met a process that can’t be improved by at least 15%.  That is a very significant number, translating into 1.2 freed up hours in an 8-hour work day.  CI not only frees up time that can be applied to other value-added functions -- it eliminates waste; reduces errors and mistakes; and improves quality of service – all desirable outcomes for a successful non-profit.  In any economy, non-profits need to run efficiently.  In the current down cycle, even more so.

The philosophy of CI is built up over time.  To instill it into an organization and make it last, the direction must come from the top down.  Active senior management involvement delivers a clear message that change is good and that experimentation and even occasional failure is okay and encouraged.  Management must also make it clear that improvements that result from CI will not result in job losses.  A solid promise that displaced workers will be retrained or reassigned to other value-added jobs is critical. 

At the same time, CI success comes from heavy involvement by those who know the processes best.  In the majority of situations, those who work the process daily know where processes fall short and where improvements can be made.  They may not have volunteered their observations or solutions in the past because they weren’t given the chance to; because they didn’t feel comfortable making suggestions for change; or because they feared they would eliminate their own jobs.  Over time, dedication to CI dispels these concerns and starts weaving CI into the organizational and cultural fabric.

CI comes in many different forms.  Individuals can work alone to improve their processes, using their own initiative and driven by the desire to make their work lives better.  Several employees can come together to start a project to address common issues and problems.  Projects work particularly well when it is recognized early in the process that the likely solution will require a time gap where someone separates from the group to build a critical tool(s) needed to complete the project.  Structured events represent the highest level of CI involvement.  They are scheduled in advance with a high level of awareness and recognition across the organization.  Events work well where rapid improvement that might otherwise take weeks or months is desired in a short time frame.  Events create focus and critical mass teams that can bust through barriers and deliver immediate results.

An example will illustrate the improvements that can be achieved through CI.  I’m just finishing a project with the FREE Foundation, a Virginia non-profit that collects and refurbishes rehab mobility equipment and gifts it to uninsured and under-insured individuals in need (www.free-foundation.org).

FREE is currently expanding its services to two major metro areas, Richmond and Hampton Roads.  Gifting is expected to more than double in the coming year.  Chapters report gifting and outcome data monthly to the parent organization.  The current process extends over one week each month and involves substantial hours of rework (re-entry of data) and inspection (review at the parent organization).  Realizing that this wasted time will grow with the expansion, FREE sought to improve the data reporting process before the new chapters came online.  A team of four (two involved in the monthly data reporting process, myself and the Foundation President) studied and mapped the current process, evaluated alternatives and laid out a plan to implement a significant improvement.  It was decided to build an online data collection and reporting tool that would allow each chapter to enter their monthly data remotely.  Once the data was entered, the tool would instantly roll up the chapter data into an organization-wide report.  As new data was entered every month, it would roll up year-to-date and quarterly statistics on gifting and outcomes, at the chapter and organization levels.  No data re-entry would be required.  Results would be instantaneously available.

I was assigned the task of building the tool.  Once a working model was ready, it was made available to the team for online testing.  Real-world data was entered and improvements were suggested and errors identified.  Several versions of the tool were built and tested.

The results reflect the value that can be created practicing CI.  The one-week period that was required each month to see final reports was reduced to a single day.  The parent organization and the chapters had instant access to all of the data.  All eight hours of data rework/re-entry and half of Executive Director’s inspection/review time were eliminated, simultaneously improving the quality of the data entered.  Outcome data entry, which was typically delayed by several days due to the priority of gifting data input, can now be scheduled as convenient and rolls up instantly.  The online tool incorporates training notes at the exact points where data is entered, further reducing data entry mistakes and errors in interpretation of data.  Color coding is incorporated to insure that each chapter enters its data in the correct locations.  Before and after process maps can be viewed at consulting.leitten.com/maps.php. 

In summary, CI is an extremely useful process that can add significant value to any non-profit.  Senior management needs to understand CI and make a visible commitment to support its implementation by everyone in the organization.  Over time, CI can become one of the fundamental tools that drives ongoing organizational success.

Brian Leitten, guest blogger, can be reached at Leitten Consulting - consulting.leitten.com.

The Power of Zilch: An interview with Nancy Lublin

One of my pet peeves has always been when well-meaning, but somewhat clueless outsiders tell us in the nonprofit sector that we need to be "more businesslike." Yes, there's much that each sector can learn from the best examples in other sectors of the economy, but I've always believed that the corporate sector should be learning from us when it comes to efficiency and getting the most out of limited resources.

Now, to our rescue, has come Nancy Lublin, CEO of Do Something and founder of Dress for Success. Nancy has just published Zilch: The Power of Zero in Business, with eleven practical lessons for business leaders on how the not-for-profit sector manages to leverage the power of Zilch into mission success, by doing more with our brands, our external people, our customers, our boards, our staff, our finances, and our stories (and all with no budget).

After reading this great book this summer, I had the opportunity to speak with Nancy by phone this morning. Her lessons and leadership are great examples, not just for business leaders, but also for our peers in the nonprofit world.

Ken Goldstein: First off, thank you! It's about time somebody stood up for our sector and told the simple truth that our managers know how to do more with nothing than most corporate managers can do with million dollar budgets. So, I hope the folks in the marble-lined corporate boardrooms listen. But my readers are all in the nonprofit sector. What lesson or takeaway do you want them to get from your book?

Nancy Lublin: It applies quite well to small not-for-profit start-ups and entrepreneurial organizations, because they've got less to begin with. The good news is that there's many ways to leverage. The book is about leveraging everything. Like external people. Who delivers your mail? Who are your neighbors? Do you know if everybody you come into contact with is marketing for you? Are they communicating your mission to the people they meet, or are they saying you don't know what's going on in your office? Is your purpose clear enough that they can help with word of mouth marketing and spread the word to the people in their circles?

Many in our sector are saying, "We've already gotten by on Zilch, now we have less than Zero." In the current economic crisis, is there any additional advice you have for nonprofits, or is it "do more of what we've always done"?

I think they've been doing this really well for along time, my one piece of advice for nonprofits is to remain focused on your purpose, don't flirt outside your space. People say, "I'll fund you to do this other thing," and it's easy to get tempted, but it ultimately leads to disaster. It's called following the money and it's not a good idea.

Your advice on partnerships, to choose partners that fit your brand, is great. A lot of smaller nonprofits are under pressure these days to enter into mergers and alliances based on dollar considerations only. How much consideration should branding receive in merger talks?

I'm a big fan of M&A activity, and would like to see more of it happen. There is a lot of duplication in the not-for-profit sector. What I'd like to see is that it's the strongest, not necessarily the biggest, that survives. Often it's the shiniest star that survives, and that's not necessarily the best. There are lots of organizations that are beloved that are actually lousy. I think that what needs to happen in the nonprofit space is what happens in the venture capital space, they look at an entire sector see what works best before picking a winner to invest in. I keep encouraging funders and organizations to look at an entire space before making a decision.

I can't tell you how many times I've had to grit my teeth and not lash out at those who think they're helpful by telling us to "be more businesslike" - How do you handle that?

We've heard that so long, and there are some things they're right about... Some things... But there's ways they can be more like more nonprofits, and not by being soft and cuddly, but by adopting some of our business practices. Like incentivizing employees without throwing ridiculous paychecks at them.

When you talk about "doing more with external people" and turning every contact into "brand ambassadors" what are some of the creative ways you've seen small, grassroots nonprofits do this?

I think the most important thing to start with is a clear, focused purpose. Are you saying you're going to end all homelessness? You're not going to do it. Pick something you can achieve, like reducing homelessness by 20% in a specific area: something achievable and measurable. Something people can say "I want to be a part of this," and get on board. This is the first thing. Simplifying your organization to make it easier for people to get on board.

You have a great story in the book with the lesson of not confusing business with friendship, where a donor was basically paying you to be her buddy and listen to her problems. This can often be a very fine line to walk. Do you see it being crossed by many fundraisers?

Apparently there was a study that the Chronicle of Philanthropy put out a month ago about sexual harassment of fundraisers; it's apparently pretty common.

So what can nonprofit managers and fundraisers do, other than just be aware of the problem?

Taking meetings in an office is a good place to start. We've always assumed that you've got to "establish the relationship" with a lunch or dinner, but it's easier to say "no" to a friend. In an office, they may say "yes" just to get you out of the office.

In the chapter on "doing more with your staff" you're very clear about hiring people who are passionate for the cause and that job interviews should include personal questions to determine that. Personally, I love interviews like that, but I find more and more organizations that have been scared by lawyers into only asking standard, dry, job-duty-and-skill related questions. What reassurance can we give nonprofits that asking about hobbies is legal?

Obviously, you want to check with your HR and legal department, but everything [a potential new hire] puts out publicly is fair game, so I check their facebook and twitter feeds. You're hiring a complete person, not a robot. I wouldn't hire somebody with less than 500 facebook friends. I want their networks. If you're hiring somebody who won't pull in all those people, hire somebody else who will. We've gone a bit overboard with lawyers telling us how our businesses should be run. And that's spoken as somebody who's been to law school.

Should all nonprofits be using social media (twitter, blogging, facebook, etc.)?

Absolutely, everybody, yes, yeah!

When I teach grant writing and fund development, I always try to emphasize how important storytelling is - that numbers served or in need can help build a case, but that it's putting faces on those numbers that gets signatures on checks. Your chapter on "doing more with your story" really shows the power of that. What's your favorite story from a small, community nonprofit?

I think at Dress for Success my story of my great-grandfather [leaving me the money that started the organization] really resonated with people. It was really hopeful, it was about making a success in a new place, and it really related to the mission of welfare to work. And I hadn't planned on it, it happened organically.

How can my readers help spread your message?

One thing you can do to do learn how to do more with less is to buy a copy [of Zilch] for yourself, and buy one for a friend. The fact that every chapter ends with practical questions really helps. It's just a real smart, savvy business book.

Yes, each chapter ends with eleven self-evaluation questions, and there are eleven chapters. What's up with you and eleven?

The end of each chapter has eleven practical questions that should really make you think about your own work place and help you evaluate how you can do more with it. The reason it's eleven is to go one further, because we at not-for-profits always have to go above and beyond. That, and I'm obsessed with Spinal Tap.

Interim Executive Director Cost Savings Question

I love it when I get a good question in my email that results in a good blog post. This is one of those situations.

If you're a regular reader of this blog, you know that one of the main things I do as a nonprofit consultant is serve organizations as an Interim Executive Director (IED).  When an organization is between leaders, and perhaps facing other problems, fiscal, strategic, or otherwise, they'll bring me in to run the agency for a limited term as kind of temporary CEO and on-site consultant.

Well, today I received a question from a colleague asking about hiring an IED. In part, the email asked:

... For an organization thinking of bringing in an interim executive before hiring a full-time executive, do you think there are any real cost savings to be had? My thinking is not really, it would be more to give time or focus to the organization and its next steps or to bring in a specific expertise to help move things forward? ...

My reply was:

The safest answer is to say that you're right, cost savings are not the reason to go with an interim; time to review, assess, plan, strategize, and hire the right person (or, more and more these days, merger) is.

If it's up to dollars and cents, you could really spin it either way, an IED costing more or less than a permanent ED. Let's say the organization's paying $70-85,000/year for a full-time ED [based on the type of organization the question related to]. An interim, depending on who they get and how they set their rates, might charge anywhere from $75-100/hour for their time.

On the surface, the Interim rate comes out much more than the permanent ED, but is the interim working 40 hours/week? I usually put in an average of 25-30 hours/week as an Interim. Also, the Interim's rate is the full cost. As an independent contractor, the organization is not paying the payroll taxes, health care costs, etc., associated with a "real" employee.

The bottom line is that the bottom line is not an argument for or against hiring an Interim. Getting things right is. And I'm available ;^)

Assymetry versus Strategic Funding

My friend, Tom, over at the True Talk Blog, has an interesting post called "Asymmetry is the New Black." The concept of asymmetry explains how small, start-up companies or organizations can effectively compete and steal marketshare from larger, established ones. Tom sees asymmetry in action in everything from YouTube to the blogging movement to the Iraqi insurgency.

Tom explains it like this:

Asymmetrical competitors use size (small), speed (fast), and thinking (innovative) to more than compensate for their relative lack of resources. This brand of competition is enabled by today's technology, which dramatically reduces the barriers to entry.

As I wrote in my comment on Tom's blog, I love the concept that being small and agile is a competitive advantage in the corporate world. It's a very exciting and inspiring idea.

Unfortunately, in the nonprofit world, we tend to be behind the curve in these types of trends. Right now it's seems that we're all witnessing contraction and mergers.

This is at least partly the result of funders getting more "strategic" with their dollars (ie: fewer, larger grants to established organizations, rather than many smaller grants to a variety of organizations).

While nonprofits look to joining forces with each other to achieve some sort of efficiency, what are we losing? Does our growth destroy the competitive edge we had in achieving our missions? I'm afraid that may well be the case in some of this.

So, how do we communicate this to funders? We've got to let them know that small is beautiful!

Tom says that, "The only option for established market leaders? Get small, get fast, get smart. Now." Isn't it an irony that as the corporate world adopts this ideology, we're being told to do the opposite?

Nonprofit Professionals - Amateur Managers?

Jonathan Peizer, of JP's Philanthropy Blog, had a great post yesterday called Being Smart and Being a Good Manager is Not the Same, and I've got to agree with him. JP says, in part:

Not that they are exclusive mind you. However, in my travels I have found many smart/intellectual/degreed people who assume that because they hold the title of manager and they are smart, they are de facto good managers. This is ironic because if you asked these same people if they were expert in an academic field that was not their own, they would defer to others who were.

Think about this in relation to how nonprofit managers come up through the ranks. People who are highly trained and qualified at helping people with their individual problems, or delivering a particular service, are put into situations where they are supervising other professionals and creating budgets, all without any prior preparation. If you ask them, they'll say they are social services experts or program experts, and that is their qualification to manage the agency, but they will never say, "I'm an HR expert and I just love spreadsheets."

After reading JP's posting yesterday, I began thinking about my own preparation for my career in nonprofit management, and now consulting.

Certainly my undergraduate degree in Politics gave me absolutely no background in supervising the work of others or running a program, let alone an entire organization. I learned critical thinking skills, I learned written communications skills, and I learned quite a bit about how to avoid some of the mistakes of the Cold War, should I ever happen to be transported back in time into Truman or Eisenhower's cabinets at certain moments in history. But I didn't learn about management.

My graduate program (Master of Public Policy and Administration, MPPA) provided a bit of management theory (Frederick Taylor and Max Weber) and organizational behavior, but the main focus of the program was on policy analysis and econometrics.

One management course I remember best from that time was one I took through the MBA program on employment law, where one of our texts was The Short Works of Herman Melville. We had a great time discussing the legal ramifications of the management decisions in "Billy Budd, Sailor" and "Bartleby the Scrivener", but I'm not sure that that's ever helped me in supervising a social worker who was dealing with her own family problems on the job.

Some of my best, and most relevant, management training came from professional development workshops at CompassPoint Nonprofit Services. I first sat in on these workshops as a staff person (I was the Director of their Silicon Valley office for several years) and eventually wound up teaching a couple of them. I continue to do occasional Supervisory Skills workshops for my clients as an independent consultant.

When I find myself wrestling with a management question, it is these workshop materials that I find myself looking back to for reference, not "Billy Budd" or "Bartleby." (Don't get me wrong; I love these stories, just not as management reference works).

(I should also mention that I had great mentoring at both CompassPoint, and at HandsNet before that, and it is that experience which most prepared me for my current role).

Which brings me back to my point and a question. How is your organization preparing your next generation of managers and leaders? Are you investing in their professional development? Are you making sure that they get the skills they need beyond program implementation, whether through workshops or mentoring?

How about yourself? Are you prepared?

A Culture of Measurement

Today's posting on Inside Philanthropy is about how critical it is to track nonprofit performance. Of course, we all already know that, right? But it's not always as easy as it sounds.

Depending on your organization, our goals are often very long-term, and our resources to follow-up are limited. So, many nonprofits fall into the trap of counting outputs instead of outcomes. The posting quotes Jason Saul of Mission Measurement:

Rather than simply counting the output of their programs or the number of clients they serve, Saul says, nonprofits should be measuring the outcomes or impact of those programs.

Saul recommends that organizations' create a "success equation." This involves asking, "what measurable items would indicate progress towards your mission." But, again, focusing on results, not process.

One pitfall that I've found organizations falling into is that there is one staff person tasked with evaluation, and the majority of the staff viewing that person as an annoyance distracting them from doing the "real work" of direct service. Saul address this as well, and talks about how all staff have to hold a piece of the evaluation puzzle:

“Measurement is a culture, not a project,” Saul says, and nonprofits should work on measurement within their existing business processes, keep it simple at first, and make it positive, not punitive.

I like that idea, of a culture of measurement. An organization that I'm currently working with definitely fits that ideal. It would be great if they all did.

The Nonprofit FAQ

The Nonprofit FAQ (Frequently Asked Questions) from idealist.org is another great resource with answers to just about any question you may have about nonprofit management, development, regulations, or technology.

From the main page, select one of the dozens of topic headings, from Boards of Directors to Telemarketing. From the topic page you'll find anywhere from one or two, to over sixty sub-topics or questions.

Many of the answers are presented in short articles posted directly to the Nonprofit FAQ site. Others are links to outside resources. All are authoritative and well-written.