Guidestar: “The Effect of the Economy on the Nonprofit Sector: March–May 2009″

Chuck McLean, Vice President of Research, and Carol Brouwer of Guidestar provide the second in a series of three important surveys — The Effect of the Economy on the Nonprofit Sector: March–May 2009“ — “to try to gauge the effect of the downturn in the economy on the American nonprofit sector.”

This online survey of public charity and private foundation employees was conducted during June 2009, and yielded some 2,300 usable responses, 92 percent from public charities and 8 percent from private foundations.

The authors note  that the overall results are “remarkably similar” to the initial survey covering October 2008 to February 2009. But they note that “…in reading respondent comments, one senses that at many organizations where things were going badly earlier in the year, they are going worse now. Reserves are being burned up, and services that had already been cut have been cut further. A typical comment from these organizations was ‘We are hanging on, barely.’ ”

Quoting from the study’s executive summary:
- More than half (52 percent) of the organizations have experienced a decrease in contributions.
- More than a third (36 percent) of grantmakers gave less money in grants over the three-month period.
- Of the organizations that have cut their budgets, the majority are making ends meet by cutting services (54 percent) and freezing staff salaries (44 percent).
- Eight percent of organizations reported that they are in imminent danger of closing their doors because of a lack of financial resources.

The 11-page report presents data organized by the structure of the survey instrument. Two questions that gave us pause:

What factors caused total contributions to decrease? (Select all that apply)
COUNT: PERCENT
790: 69%    Fewer individuals gave
782: 68%    Gifts from individuals were smaller
433 : 38%   Corporate gifts were smaller
428 : 37%   Private foundation grants were smaller
262:  23%   Corporate gifts were discontinued
252: 22%    Private foundation grants were discontinued
155; 14%     Government grants were smaller

What measures have you used to reduce your budget? (Select all that apply)
COUNT: PERCENT
442: 54%     Reduction in program activities/services
358: 44%     Salary freeze
269: 33%     Hiring freeze
239: 29%     Layoffs
204: 25%     Other (please specify)
184: 23%     Salary reduction
171: 21%     Reduction in employee benefits
128: 16%     Reduction in operating hours

The first question provides an alert about not just reductions in giving, but reports of giving by corporations and private foundations being “discontinued”.

The second  program suggests to we are still in the “cut and cope” mode, which may well not be a realistic response to the harsh few years ahead.

We have written earlier about this overall topic, concerned especially about the role of boards and board leadership in taking stock of and action to address the declining situation.

We do note, and applaud, the survey respondent demographic of 52% identifying themselves as CEO/ED/President. Less helpful to the value of the study was the 5% identifying themselves as Board Member/Board Director/Trustee.

We will watch with interest as the third of these surveys emerges later this year.

David R. Curry

Cincinnati Public Library Board dips deep into “emergency sources of income”; places tax levy on November ballot

The continuing financial crisis and its “second-order consequences” on non-profits are leaving many boards in a corner.

Short-term options to maintain operations and program integrity are often limited and high-risk. Exercising such options can invite public scrutiny, funder alarm, and board defections. Articulating longer-term options to guide the organization forward to stability and sustainability can be just as difficult and dangerous.

The Board of Trustees of the Public Library of Cincinnati and Hamilton County (PLCHC) has been persevering in addressing dramatic short-term and long-term challenges.

PLCHC, which serves at the public library for Cincinnati, Ohio, depends largely on funding from the state’s general fund, and has seen declines of 10% in that funding from 2000 to 2008. Another 15% reduction so far this year will result in an annual funding shortfall of over $10 million by 2010. PLCHC is the only metropolitan library in Ohio which receives no local tax support.

Since 2000, “public hours have been reduced by 10%, staffing has been cut by 18.5%, capital expenditures have been postponed, and materials purchases reduced. At the same time, Library usage has increased by 17%, reaching a record high 15.6 million circulation in 2008 with more than 5.6 million visits to a Library location,” PLCHC said.

In addressing the shortfall, the board has taken aggressive action, perhaps even raising questions about its governance performance.

PLCHC notes that “…this year the library has hit a wall, budgeting or spending $7 million from unrestricted gift and trust funds, and spending $1.8 million in capital funds.” Further, the library said the current fiscal year shortfall “may lead to a request next month for an emergency transfer from the capital fund, which retains $2.5 million.”

Board actions which dip into unrestricted gift and trust funds – as well as depleting capital funds – to maintain operations raise what we would term “red flags.”

We have written a good deal about the importance of “reasonable transparency” on the part of nonprofit boards when they take strategic decisions that represent a material change in its prospects for viability and sustainability.

This Board certainly meets that test given its structure and practice.

The website notes that “The Library is under the control and management of a Board of Trustees consisting of seven members. Four of the Board members are appointed by the County Commissioners and three by the judges of the Court of Common Pleas. Board members are appointed for a term of seven years, the term of one trustee expiring each year. http://www.cincinnatilibrary.org/info/trustees.asp

So the Board is balanced and politically hard-wired. Board meetings are public and can be watched on the Waycross Community Media website. So these decisions are (painfully) public and immediately so.

Moreover, the Board’s May meeting included a new provision to post the minutes of all meetings online going forward beginning with that meeting.

We found those minutes to address, in part, the “red flags” noted above”

From the posted Board of Trustees Meeting Minutes of May 11, 2009 meeting:
Fiscal Review
The status report received on May 1 has been updated by the Fiscal Officer’s report just presented. However, it remains true that since we already are using gift and special revenue funds as operating revenue this year, additional sources of emergency income are limited. A total of $2.5 million remains in the St. Bernard and Reading capital funds, about $566,000 is set aside for the Pleasant Ridge ADA project, another $400,000 may be available in the Gift Fund, and the Armstrong Fund (for the general use and benefit of the library) has about $750,000 outside the restricted principal.

The Committee acknowledged that they are open to using capital funds to offset operating revenue shortfalls, as needed.

Open indeed. Dangerous, as we are sure the board is aware,  insofar as “emergency income” is obviously running dry, fast.

While earlier board minutes do not seem to be posted, we presume from media reports that the long term strategy of shifting funding to include a meaningful, local millage was vigorously engaged.

On June 9, 2009, the PLCHC Board of Trustees voted to place a 5-year, 1-mill levy on the ballot for the Hamilton County election on November 3, 2009.

If approved by voters, the 1-mill levy would raise approximately $20 million per year allowing the library to “…keep branches open, keep the collection up-to-date, continue much-needed services to children, teens, and seniors available and meet the growing demand for Library service.”

Board President Elizabeth LaMacchia said the Library is seeking the levy “because it must have a source of stable, adequate funding…Failure of this levy will be devastating. We are now in survival mode. Without the additional funds a levy would provide, we will be forced to severely reduce our services including closure of 15 to 20 branches. We cannot allow reductions on this scale to take place at a time when Library services are needed more than ever. We must save our Library.”

So one applauds the courage of Board leadership in making this courageous, if high-risk decision. But we know that even long-established millage funding for public libraries can be a significant challenge to renew, so establishing a new levy will certainly test the board, staff and community. We wish them well.

We will monitor this situation and have invited the library to comment on our observations. We will also monitor the blog of library director Kimber L. Fender who will find much to communicate about in support of the levy.

With only three Board meetings scheduled before the November ballot, perhaps we will even tune in to meetings on the web. We will be interested in just how deep the board may dip into emergency sources of income, and how it will manage the ballot measure whose outcome will largely define the future of public library services in Cincinnati and its immediate region.

David R. Curry

US Government: intent to be “passive shareholder” in GM despite 60.8% stake

We continue to watch the volatile shift of business models and governance structures in both the corporate and nonprofit world, driven by the financial crisis and continuing recession.

But we paused, to be sure, as we listened to CSPAN coverage of testimony 11 June 2009 by the Treasury Department’s Ron Bloom, Senior Auto Industry Adviser, before the Senate Committee on Banking, Housing and Urban Affairs Finance.

We heard Mr. Bloom state (vigorously) that the U.S. Government intends to be a “passive shareholder” in General Motors, voting only on “core governance issues” such as Board slates, etc.

He noted that the U.S. Government intends that its involvement will not be “onerous or overbearing.”

We observe that while the whole situation of the government holding a majority stake in GM or any private enterprise is both unprecedented and regrettable, it is “passive” governance performance itself that might well be seen as the driver for the situation GM finds itself in.

A 60+% stake in a commercial enterprise means that one controls the company. It seems an oxymoron for the government, or any entity, to responsibly be a “passive owner.”

We will watch for lessons and insights from this rather dangerous model, which may be in place for a number of years. Hopefully, such lessons and insights may inform governance challenges in the nonprofit sector.

David R. Curry

Legacy in Disarray: Baltimore Opera Archives Auctioned in 45 Lots

We wrote earlier about the Chapter 7 bankruptcy liquidation of the assets of the Baltimore Opera Company, following the March 2009 decision to leave Chapter 11 protection.

The auctioneer’s catalog covering the first large portion of the Company’s assets had a section identified at lots associated with the Baltimore Opera archives. We have captured that listing here, primarily because it contains some important lessons for governance.

First, we note the important designation made by the trustee in this bankruptcy, controlling four lots in particular. These lots obviously include materials that represented artistic product and artist contracts, and should have been protected from unscrupulous buyers. They could be sold to buyers who either were pre-approved, or approved post-sale, by the Bankruptcy Court.

Those “protected” lots were cataloged as:
- “Approximately Sixty Six production scores containing personal notes from the director”

- “Approximately one hundred and sixty seven Videocassettes, some of past Baltimore Opera Company performances.”

- “Approximately ninety seven CD’s & DVD’s, some of past Baltimore Opera Company performances.”

- “Large group of various artists’ contracts with signatures.”

The successful buyer of the first three lots above, we understand, may have been a Baltimore institution with significant standing in the music education firmament. We do not believe the last lot above sold.

Apparently the other 42 lots did not sell, either because no bids were offered, or those that were offered fell below an acceptable range to the trustee. What will happen to them is unclear.

We do know that another auction in this liquidation will occur on 28 May 2009, and will involve a range of assets including additional archival materials.

The forensics on these 42 unsold lots is important.

Boards which face difficult end-games for their nonprofits need to clearly understand what a Chapter 7 liquidation decision means, and consider taking responsible action to move historical materials out of harm’s way.

Quite apart from the historical materials and the legacy they represent, the lots in this initial sale included one that should give any Board pause:
- “Lot of binders of corporate records including annual meetings, committees, etc. from 1950’s-2000’s.”

One can imagine the tales to be told in committee and board meeting materials over five decades!

We will track this sad story to its end in later May, and report on the final auction, the fate of these historical materials, and further lessons for nonprofit governance.

David R. Curry

Ford Foundation and Getty Trust Announce Cuts Driven by Endowment Losses

We would not normally have treated news of major cutbacks by these two foundation giants in the same piece, but the announcements appeared on the same day in the New York Times (30 April 2009).

We note with interest the very different strategies and rhetoric employed in these announcements, and what they suggest about how these foundations are addressing a common, and very challenging, problem.

The Ford Foundation released a statement to the media which drove the New York Times one-paragraph report. It is not posted on the Foundation website because, as a spokesperson noted, the Foundation is “still in the process of conducting personal outreach to the foundation’s global partners, contacts and others affected by this decision…”

The statement and its implications are worth reflecting on:

__________________________________

The Ford Foundation confirms with great regret that in response to the serious economic downturn it must wind down its operations in Russia and Vietnam in the summer of 2009.

Over the past 15 months the foundation has undertaken a comprehensive series of cost-saving measures, reducing expenses by more than $22 million in 2009.  These measures have been pursued to preserve our core grantmaking budgets, and every dollar saved has gone directly to our grant programs.

Regrettably, these savings have been overtaken by the decline in global markets and the corresponding decline in the foundation’s endowment, which has seen a 30 percent drop in value over the last year.  Given our obligation to our grantees worldwide, we have been forced to make very hard choices to bring about further savings.

We are enormously proud of the efforts of our staff and grantees in Russia and Vietnam over the last 13 years.  They have done courageous work in key areas:

- In Russia, they have promoted diversity and tolerance, supported artistic excellence and cultural richness, and helped build a strong civil society.  Opened in 1996, the office has supported initiatives to strengthen academic innovation and create strong communities of scholars; has helped build civil society organizations; and has significantly advanced a flourishing contemporary arts movement.

- In Vietnam, our grantees have promoted diversity and tolerance, helped expand economic opportunity, and supported the development of a vibrant civil society.  Opened in 1996, the office has supported initiatives to strengthen academic innovation and create strong communities of scholars; supported the development of new talent and fresh approaches in filmmaking; helped test new financial mechanisms in support of the rural poor; and has significantly advanced work to address the legacy of Agent Orange.

Our support for the International Fellowships Program (IFP) will continue in both countries through 2014. In Vietnam, our support for the Special Initiative on Agent Orange/Dioxin will continue through 2011.

The Foundation is very grateful to have had the opportunity to work in both Russia and Vietnam and to engage with such an impressive array of organizations and individuals.  We are heartened and encouraged by the ongoing work of these partners, who are working tirelessly to build a strong, inclusive and sustainable future for their countries.

__________________________________

We did not see any additional information posted on the nature or focus of other cuts which were part of the noted “comprehensive series of cost-saving measures, reducing expenses by more than $22 million in 2009”

The Getty Trust’s approach was markedly different, as its posted statement details:

________________________________

STATEMENT FROM GETTY TRUST PRESIDENT AND CEO JAMES WOOD REGARDING GETTY’S FY 2010 BUDGET

The J. Paul Getty Trust issued the following statement in connection with Board of Trustee approval of its 2010 fiscal year budget.

April 27, 2009

The Board of the J. Paul Getty Trust approved the Getty’s 2010 fiscal year budget on Wednesday, April 15. The FY10 endowment budget of $216 million, plus one-time transition costs of $3.9 million, representing a 24 percent reduction from the previous year, will be effective July 1, 2009.  The new budget reflects reduced income from the Getty’s endowment, which has declined about 27 percent since July and totaled $4.2 billion as of March 31.

Louise Bryson, Chair of the Getty’s Board of Trustees said, “The Board worked closely and cooperatively with Jim Wood and the Getty’s management team to develop a budget that reflects the substantial decline in the value of the Trust’s endowment, and therefore reduced income, while taking into account the importance of maintaining the Getty’s capacity, through its talented professional staff, and its ability to continue important program work here in Los Angeles and around the world.”

Approximately 97 employees, or 6.7 percent of the Getty’s current staff, will be laid off as a result of the budget reduction.  Vacancies, attrition and the expiration of limited term agreements bring the total number of positions eliminated to 205 or 13.8 percent of the Getty’s current 1,487 budgeted staff positions.

“The Getty’s extraordinary employees are crucial to accomplishing the Getty’s mission.  Protecting as many of our employees as possible from layoffs has been a priority throughout the budget development process.  The management team focused on our long-term strategic goals in making reductions. We also felt strongly that it was essential to preserve free entrance and existing public hours for our visitors at both the Getty Center and Getty Villa,” said President and CEO James Wood.

The budget preserves free admission and current visiting hours for both the Getty Center and the Getty Villa. There will be an increase in the parking fee from $10 to $15, effective July 1.

Other key budget provisions include a continued hiring freeze, extended timing for important projects in order to reduce spending next year while preserving the Getty’s important work in Los Angeles and around the world, elimination of staff salary increases and pay cuts of up to 6 percent for senior leadership.

_____________________________

We do not believe that any direct comparison of these two actions is productive: these are very different organization although they certainly share scale and are facing endowments losses of  30% and 27% respectively.

But we do note the coloration of the two announcements in terms of how the missions of the respective foundations are being protected and what was cut and what was not to be compromised.

Since talent is so critical to foundation performance and impact, we generally watch closely for actions that affect staff. While we do not gain visibility to any detail on this in the Ford Foundation announcement, the Getty Trust action is straightforward in discussing the staff reductions it is taking, as well as compensaiton actions, including “pay cuts of up to 6 percent for senior leadership.”

Solidarity never goes out of style.

We will monitor similar actions by other major foundations going forward, watching for transparency, stated strategies and rationales in this difficult economic environment.

David R. Curry

Boards, Endowments and Action Verbs: Raiding, Tapping, Leveraging for Survival

In mid-April, the New York City Opera won the approval of the New York State Attorney General’s office to source an additional US$6.6 million from its endowment “to meet payroll and other needs.” The approval was based in part on legal filings which outlined the opera company’s plans to resume its programming and supporting actions to raise funds, etc.

New York City Opera’s budget next year is estimated at between $25 million and $30 million. The company recently announced a reduced season of five productions for 2009-10.

The New York Times (April 18, 2009) report  of the most recent action by Daniel J. Wakin opened with:
“The New York City Opera said on Friday that it had raided its endowment of a total of $23.5 million to pay off debts and right the troubled company’s finances, leaving little left in its coffers…”

Bloomberg (April 22, 2009) ran commentary by Zinta Lundborg that was less measured:
“In classic media playbook style, the New York City Opera selectively released more bad news on a Friday afternoon, hoping nobody would notice that it had once again reached deep into its endowment.

“That money, left by Lila Acheson and DeWitt Wallace, the founders of Reader’s Digest, is sure going fast.

“In 2001, according to a petition filed with the New York State Supreme Court, it was $51 million. Until the company spent $17.5 million in October 2008, it stood at $27 million.

“Now, with another whopping $6.6 million used for operating expenses, the endowment is down to barely $3 million.

“Lest you think the company’s disastrous financial situation reflects a melting economy, the damage has been largely self- inflicted. A clueless board led by Susan Baker has squandered the company’s endowment and ruined its good name.”

So action verbs do matter, to be sure, in journalism as much as in responsible governance.

Our purpose in writing on this is not to agree with or challenge the media reports. Our interest is not about whether the Board made a colossal and irresponsible end-game blunder or is playing out a desperate gambit that may just win that end-game. Our intent is to try to think clearly about how boards can govern better and more responsibly.

So reading these media reports led us to explore the NYCO’s website to hear its side of the story. We anticipated finding a statement by the Board chair, or perhaps by George R. Steel, the artistic director and general manager, or perhaps just a statement with no specific attribution.

We anticipated a high-level summary of that part of the legal filings which outlined the business plan to survive and thrive.

But there is nothing.

There is a page on the site which summaries press releases and an “In the News” section which tracks media coverage. The latter did not reference either the New York Times or Bloomberg reports. http://pressroom.nycopera.com/pr/nycopera/news/default.aspx

We inquired, via numerous emails and missed calls, with the NYCO to understand why there was no reference to the endowment request, the attorney general’s action, or the media reports of the action.

Pascal Nadon, the company’s Director of Media Relations & Strategic Partnerships, finally responded via email with a courteous, if clipped:

We volunteered information and a statement to the press about the borrowing from our endowment, and the news was duly reported.  A copy of the statement is attached. Court documents related to this matter are a matter of public record. We are dedicating our website to informing the public about our current activities: completing the renovation of our theater, presenting our annual, free VOX showcase of American opera and offering subscriptions for our 2009-2010 season, which opens in November.

Statement:
In obtaining judicial approval to borrow from our endowment, New York City Opera has been able to get itself back on track, preserving an iconic New York institution. We have implemented a new financial plan, and the artistic team is only months away from opening an exciting new season. The People’s Opera is moving forward, now on firm financial ground.

We have been reflecting on the above in the context of the very useful discussion underway around the National Association of Corporate Directors set of “Key Agreed Principles to Strengthen Corporate Governance of U.S. Publicly Traded Companies” issued late in 2008.

We posted on this earlier at : NACD Key Principles: A framework for non-profit governance?

The general principle involved here is what we might term ”reasonable transparency” when Board actions potentially compromise a nonprofit’s operating viability.

Board action to reduce an endowment by two-thirds in a short period – even with a state attorney general’s approval – probably meets that condition.

In summary, we believe that nonprofit boards taking aggressive, high-risk actions of this type have a parallel responsibility to assure that there is reasonable transparency about those actions.

Declining to make available any of the business plan details from the legal filings (they were only available from the AG’s office in Manhattan), and deciding not to post anything at all about the endowment action, is not reasonable transparency.

Deciding to not even post the terse statement shared with us via email as above is not reasonable transparency.

I closed my email exchange with Mr. Nadon with “best wishes for a great season ahead…”

We do wish NYCO a great season ahead, and great success going forward allowing it to quickly repay the loans taken from its endowment. We suspect, and hope, that as the Board is able to do so, “reasonable transparency” about the endowment may be more appealing.

David R. Curry

We note that after we drafted the above, on April 29 Bloomberg reported that:

“A strike may cripple the New York City Opera later this year if its new general manager and artistic director, George Steel, seeks extensive concessions, said the union representing opera singers, stage directors and other production staffers.

“The American Guild of Musical Artists said in a memo to members that “given the changes that George Steel wants to make in our contract, members are advised that the possibility of a strike against New York City Opera is likely.”

Related Posts
Orlando Opera suspends operations; “future of the company” to be announced end of May

Baltimore Opera: Chapter 7 Liquidation Proceeding

“Core Principles for Public Engagement”: A Formulation/NCDD

When over 40 non-profit organizations working in the same general field of endeavor agree on “core principles” regarding anything, one understandably takes note.

When the core principles they agree on speak to a fundamental dimension of nonprofit performance – public engagement – we sit up and take note.

“Public engagement,” we reflect, is a key strategy by which nonprofits are able to understand their constituents and calibrate their mission in serving the public good. And serving the public good, in our thinking, is the raison d’être for nonprofits.

When we encountered an uninvited email with a “NCDD Update” subject line we almost just deleted it: we did not recognize the NCDD initialism

But in our preview window we could see the first item:

1. New “Core Principles for Public Engagement” doc about to be submitted to Obama open governance initiative.

We paused and explored further, but found some caution flags.

The prefatory language for the Core Principles was one such flag. With respect, it reminds one of writing that seems driven to include every key word in the liberty-freedom-justice-democracy lexicon, but which seems to lose coherence before one finishes reading.

Excerpts:
“…Engaging people around the issues that affect their lives and their country is a key component of a strong democratic society.

“…Public engagement involves convening diverse, representative groups of people to wrestle with information from a variety of viewpoints all to the end of making better, often more creative decisions.

“…The more any given public engagement effort takes into consideration the following seven Core Principles, the more it can expect to effectively build mutual understanding, meaningfully affect policy development, and/or inspire collaborative action among citizens and institutions…”

Yes…

But the core of the matter is the Seven Core Principles themselves:

_____________________________________

The Seven Core Principles
These seven principles reflect the common beliefs and understandings of those working in the fields of public engagement, conflict resolution, and collaboration. In practice, people apply these and additional principles in many different ways.

1. Careful Planning and Preparation
Through adequate and inclusive planning, ensure that the design, organization, and convening of the process serve both a clearly defined purpose and the needs of the
participants.

2. Inclusion and Demographic Diversity
Equitably incorporate diverse people, voices, ideas, and information to lay the groundwork for quality outcomes and democratic legitimacy.

3. Collaboration and Shared Purpose
Support and encourage participants, government and community institutions, and others to work together to advance the common good.(a)

4. Openness and Learning
Help all involved listen to each other, explore new ideas unconstrained by predetermined outcomes, learn and apply information in ways that generate new options, and rigorously evaluate public engagement activities for effectiveness.

5. Transparency and Trust
Be clear and open about the process, and provide a public record of the organizers, sponsors, outcomes, and range of views and ideas expressed.

6. Impact and Action
Ensure each participatory effort has real potential to make a difference, and that participants are aware of that potential.

7. Sustained Engagement and Participatory Culture
Promote a culture of participation with programs and institutions that support ongoing quality public engagement.

(a) In addition to reflecting democratic ideals of liberty, justice, and freedom for everyone,

_____________________________________

We have a very strong interest in efforts to clarify, and codify,thinking and expereince in any field, and applaud this work. We do pause when such efforts include footnotes to clarify language which is presumably crafted to be clear in the first place.

That said, we believe such work must also be actionable and measurable. We are less certain that either of these benchmarks are achieved in these principles at their current stage of development.

We also pause when we perceive a strain in the formulation by attempts to impose devices like the “a and b” couplets for each of seven principles. By the time one reaches the seventh – Sustained Engagement and Participatory Culture – one wants to urge the drafters to exercise some liberty, and perhaps recognize that adding an eighth principle could usefully distinguish between these linked but very different ideas.

Of course, each of these “principles” are useful in some tactical sense. Action verbs drive the implementation language, and there is at least consistency in their use. Less consistent is how well the subordinate language in each principle informs the “title.”

For example, Principle 7 (Sustained Engagement and Participatory Culture) advocates promotion of “a culture of participation with programs and institutions that support ongoing quality public engagement.”

This language does not really speak to the “what and why” of sustained engagement or participatory culture in any helpful way.

As with all efforts to be clear about practice and experience in a field, this effort will benefit from refinement over time. We look forward to such refinements and are confident that we will post on them in the future.

Finally, we are intrigued by “endorser lists” in general, so we thought we should share the most current list associated with these principles. A quick scan will evidence how wide a range is represented (accessed 9 May 2009):

The International Association for Public Participation (IAP2), www.iap2.org
The National Coalition for Dialogue & Deliberation (NCDD), www.ncdd.org
Institute of Cultural Affairs (ICA), www.ica-usa.org
International Association of Facilitators (IAF), www.iaf-world.org
National League of Cities, www.nlc.org
Association for Conflict Resolution’s Environment and Public Policy (EPP) Section, www.mediate.com/acrepp/
ToP (Technology of Participation) Trainers Network, www.ica-usa.org/index.php?pr=top-network
Co-Intelligence Institute, www.co-intelligence.org
League of Women Voters, www.lwv.org
Public Agenda, www.publicagenda.org
Canadian Community for Dialogue & Deliberation (C2D2), www.c2d2.ca
Forum Foundation, www.forumfoundation.org
The Center for Deliberative Democracy at Stanford University, http://cdd.stanford.edu/
AmericaSpeaks, www.americaspeaks.org
National Issues Forums Institute, www.nifi.org
Everyday Democracy, www.everyday-democracy.org
The Democracy Imperative, www.unh.edu/democracy
Public Dialogue Consortium, www.publicdialogue.org
U.S. Transparency, www.UStransparency.com
Network for Peace through Dialogue, www.networkforpeace.com
Common Sense California, www.commonsenseca.org
The Jefferson Center, www.jefferson-center.org
Global Facilitator Service Corps, www.globalfacilitators.org
Deliberative Democracy Consortium, www.deliberative-democracy.net
Institute for the Advancement of Aboriginal Women, www.iaaw.ca
Future Search Network, www.futuresearch.net
Institute for Conflict Analysis and Intervention at James Madison University Communication Studies, www.jmu.edu/commstudies/conflictstudies.shtml
The Policy Consensus Initiative, www.policyconsensus.org
The Communications Center, Inc., www.buildingdialogue.com
Common Knowledge, www.ckgroup.org
The Transforming Communication Project, www.tcpcommunity.org
Intellitics, Inc., www.intellitics.com
DeepDebate, www.DeepDebate.org
Omega Point International, Inc., www.omegapoint.net
The Broadwell Hill Learning Center and Resiliency Initiative, www.broadwellhill.org
Institute for Cultural and Environmental Understanding, www.ICEU-site.com
Pearce Associates, www.pearceassociates.com
Center for Voter Deliberation of Northern Virginia, www.VoterDeliberation.org
Facilitators Network Singapore, www.fns.sg
Institute for 21st Century Agoras, www.globalagoras.org
Center for Wise Democracy, www.wisedemocracy.org
Jewish-Palestinian Living Room Dialogue, http://traubman.igc.org/dg-prog.htm
Meta-Culture Dialogics (India), www.meta-culture.org
Bay Area Nonviolent Communication, www.baynvc.org
Ag Innovations Network, www.aginnovations.org
Masterful Facilitation Institute, www.masterfulfacilitation.ca
The FUSION Foundation, www.thefusionfoundation.org
Breakthroughs Unlimited Inc., www.breakthroughsunlimited.com
HIGHER EDge, www.higheredge.org
Omega Point International, Inc., www.omegapoint.net
Global Citizen Journey, www.globalcitizenjourney.org
Workplace Connections, www.workplaceconnections.com
Peaceful World Conversations, www.PeacefulWorldConversations.org
ARINA, Inc., www.global-arina.org

We acknowledge that we have not visited the websites of all of these organizations, and suspect we might be surprised (even dismayed?) by what would be found at some of them given their titles. But we are catholic in our willingness to explore any and all of them…in the spirit of engagement…

David R. Curry

World Digital Library launch: governance, charter, sustainability

We having been exploring the newly launched World Digital Library (see postings summarized below from our paralell effort at digital stewardship now). This post shares some observations and thoughts about WDLs charter, governance, and sustainability.

The WDL site does not present a formal charter or speak to the governance structure of the initiative, beyond the role of trhe Library of Congress, UNESCO and the Experts Meetings convened during the formative period of the last few years.

Clearly, the Library of Congress is a central player since the WDL is hosted by the Library of Congress and on mirror sites, and a team based at the LC maintains the site. Clearly UNESCO is a central player for all the sensible reasons, and confirmed by the fact that UNESCO is the only “branding” evident on the site.

In the FAQ section of the site we noted a less than precise answer to a very good question:

________________________________________

Q: How will the site be maintained and governed in the future?
A: Sustainable growth will be based on the establishment of a worldwide network for the production, submission, cataloging and translation of content. UNESCO and the Library of Congress have issued a universal appeal for participation and are developing a multilateral charter. The WDL charter will provide for a governance structure, including annual meetings of partners to develop a model for long-term financial sustainability and to develop policies relating to intellectual property, and location and maintenance of host and mirror sites, among other issues.

__________________________________________

Obviously this is work in progress, but it is unclear how much progress has been made and when this charter and governance structure will be formalized, presumably via some kind of UNESCO member action.

Given the sensible goals of having a collection which increasingly represents the richness of UNESCO member states, global cultures and traditional knowledge, it is understandable that this could be a delicate process.

The FAQ also suggests that there are operational, IP and financial sustainability issues to be sorted through. This will present a number of challenges to be sure.

We have used the contact and query forms provided on the WDL site to ask a series of questions around  charter, governance and sustainability, and will post on the answers as they become available.

We note an important statement made in the UNESCO media release about the WDL that we share below:

UNESCO Director-General Koïchiro Matsuura noted, “”UNESCO welcomes the creation of the World Digital Library which reflects the values and priorities of our Organization,” Mr Matsuura declared. “WDL offers an invaluable platform for the free flow of information, for international solidarity, for the celebration of cultural diversity and for the building of inclusive knowledge societies. With projects like the Digital Library, the cultural and societal potential of digital technologies come into their own.”

We will think more about “…the cultural and societal potential of digital technologies com(ing) into their own.”

Finally, financial sustainability will inevitably involve funding sources so we took note of the financial contributors receiving credit on the site at its launch (but, happily, no further branding!). We found it equally interesting that the acknowledgment comes from LC:
“The Library of Congress and its WDL partners acknowledge the following financial contributors:
- Google, Inc., for $3 million for the initial development of a WDL plan and the WDL prototype.
- The Qatar Foundation, for $3 million in general support for the WDL, and to support the development of the Central Library of the Qatar Foundation as a key node in the WDL network.
- The Carnegie Corporation of New York, for $2 million to support the inclusion of cultural institutions from sub-Saharan Africa and Eurasia in the WDL.
- The King Abdullah University of Science and Technology, Saudi Arabia, for $1 million to support activities relating to the dissemination, through the WDL, of digital versions of manuscripts and other materials relating to science in the Arab and Islamic worlds.
- Microsoft, Inc., for $1 million in general support.
- The Lawrence and Mary Anne Tucker Foundation to support the establishment of a digital conversion center at the Iraqi National Library and Archives.
- The Bridging Nations Foundation for the development of Middle East-related content for inclusion in the WDL.”

Thinking about where designated funding above is coming from and being focused to in terms of region and heritage, one can quickly become concerned about the overall development/funding strategy.

We should be very cautious about building a World Digital Library which evolves its content based, in any important part, on where designated funding (by foundations, governments, corporations or individuals)  focuses resources for digitization, translation and interpretive efforts around specific cultures, geographies, time periods or formats. This is a dangerous path indeed.

This issue appears to be a rather immediate governance question. We have asked WDL about this aspect of the sustainability strategy and will post on any replies.

David R. Curry

This is cross-posted in one of our parallel efforts: digital stewardship now

Related Posts
World Digital Library Launch: “9D” collection access…

World Digital Library Launch: Manuscripts (124) provide proof-of-concept

World Digital Library Launch: Initial Sound Recordings (five easy pieces)

World Digital Library (WDL) Launched: A Whimper AND a Bang

World Digital Library Launch/ UNESCO

Establishing a ‘fiduciary society’: non-profit governance and the public good…

John C. Bogle, founder and former chief executive of the Vanguard Group of Mutual Funds, writes a compelling opinion article – A Crisis of Ethic Proportions: We must establish a ‘fiduciary society’ – in the Wall Street Journal (20 April 2009)  (accessed 25 April 2009).

Mr. Bogle argues that “a heavy responsibility for the (economic) meltdown ” lies with “a broad deterioration in traditional ethical standards.”

He charts this deterioration as part of “the growth of giant business corporations and giant financial institutions controlled not by their owners in the ‘ownership society’ of yore, but by agents of the owners, which created an ‘agency society.’ The managers of our public corporations came to place their interests ahead of the interests of their company’s owners…”

He concludes that “We must work to establish a “fiduciary society,” where manager/agents entrusted with managing other people’s money are required — by federal statute — to place front and center the interests of the owners they are duty-bound to serve. The focus needs to be on long-term investment (rather than short-term speculation), appropriate due diligence in security selection, and ensuring that corporations are run in the interest of their owners. Manager/agents need to act in a way that reflects their ethical responsibilities to society. Making that happen will be no easy task.”

Observation
We observe that nonprofit governance has not been immune to the malaise Mr. Bogle speaks to in the commercial sector.

Indeed, reworking Mr. Bogle’s concluding language a bit helps us think more clearly about the challenge facing nonprofit governance.:
We must work to establish a “fiduciary society,” where nonprofit trustees and directors recognize and act to place front and center the interests of the public good they are duty-bound to represent. The focus needs to be on long-term public good and responsible performance, as well as appropriate due diligence and oversight of program direction and effectiveness. Nonprofit boards need to act in a way that reflects their ethical responsibilities to society.

Making that happen will be no easy task.

In an earlier post — NACD Key Principles: A framework for non-profit governance? (31 March 2009) — we suggested that emerging principles for responsible corporate governance could contribute to strengthening nonprofit governance. We invite you to read that post.

David R. Curry

Native Arts and Cultures Foundation formally launched: ‘perpetuation of profound and beautiful art forms’

We are very interested in both  formalities and substance when new nonprofit initiatives are launched. We are equally intrigued when new initiatives involve indigenous cultures, their preservation and new artistic expression through which they endure.

So we took special notice of media reports of the formal launch of the Native Arts and Cultures Foundation (NACF).

The foundation was formed in 2007, when it incorporated and established its nonprofit status. The foundation does appear on Guidestar but the record does not include any information of substance, such as a mission. The incorporation was apparently handled by Larson Allen in Minneapolis as it is listed as the physical address.

We take note of the Guidestar record because the new foundation does not seem to have a website (not a requirement to do good work to be sure) and there is no evidence of a media release or contact information.

We believe a clear and compelling mission is critical to any organization so we took special note of the statements from interviews in media reports. We construe that the mission of the new organization is to be found in these statements:

- Tara Lulani Arquette, a Native Hawaiian, has been named the foundation’s president and chief executive. She noted, “The arts have always played a very significant role in Native cultures. What connects one generation to the next is often communicated through the arts, and the NACF will be a powerful instrument for the continuance of Native cultures.”

- Elizabeth Theobald Richards, described as the program officer at the Ford Foundation who has overseen the project and a Cherokee, said, “We needed our own endowment for native arts and culture in this country in the coming century. The indigenous peoples of this country have an incredible wealth of cultural heritage and cultural expression that very few people know about. And it’s also incredibly underfunded.”

- Walter Echo-Hawk, chairman and creator of the foundation, said, “Arts and culture and traditional languages and religions have been the glue that held Native Americans together – often in the face of great adversity. For many years the government policy was to assimilate native people into mainstream society and essentially stamp out attributes of native culture. It’s a testament to the tenacity of our people that we have any native cultures or religions left in the United States. We are seeing a remarkable cultural renaissance in the tribal communities. But the support of the arts has been almost nil. It’s been very difficult for Indian tribes to also support their own arts and cultures… Culture, even though it is central to our identity, is the last to be nurtured. There is a need to inject resources into the perpetuation of these profound and beautiful art forms.”

The Ford Foundation made an initial $5 million contribution “to endow the new foundation permanently, with an additional $5 million promised if new partners brought $3 million more to the table.” The Rumsey Band of Wintun Indians, based near Sacramento, California, made a grant of $1.5 million, and announced “a challenge to other tribal nations to match its gift. Once the challenge is met, Rumsey has promised an additional $1.5 million, which would bring the tribes’ contribution to $4.5 million.”

The organization will be based in Portland, Oregon and will start with an annual operating budget of $500,000 and a staff of four. NACF said it hopes to provide about $4 million in grants and program services over the next five years.

The formation of the Foundation “was guided by a Native ‘leadership circle’ and its board of trustees is majority Native. Members of the board include:
- Walter Echo-Hawk, board chair; Pawnee. He is an attorney, tribal judge, and former senior attorney with the Native American Rights Fund.
- Elizabeth Woody, board secretary; Navajo/Warm Springs/Wasco/Yakama. She is a poet, writer, visual artist and the former director and developer of the Indigenous Leadership Program at the nonprofit organization Ecotrust.
- Joy Harjo, board treasurer; Mvskoke/Creek. She is a poet and musician.
- Marshall McKay, member. He is a tribal chairman of the Rumsey Band of Wintun Indians.
- Letitia Chambers, member. She is a retired senior executive and former U.S. representative to the United Nations General Assembly.”

We will monitor the programming and milestones of this new foundation with enthusiasm.

David R. Curry

“Finding Leaders for America’s Nonprofits” Bridgespan Group Report

We continue to be impressed by the timeliness and “span” of Bridgespan Group’s recent research.

This new report updates work done in its 2006 study “The Nonprofit Sector’s Leadership Deficit” and was commissioned by American Express.

Bridgespan surveyed over 400 U.S. leaders of nonprofits with $1 million or more in revenues, and found that “despite tightening budgets, nonprofits foresee a need to fill 24,000 vacant or new roles in 2009.” A key focus was the potential for “bridging” talent from for-profits to nonprofit leadership roles. We recommend reading the full report.

The report is structured into four key messages excerpted below. These “messages” receive full discussion and are presented in the context of data tables from the survey research:

_________________________________________

Message No. 1: The leadership deficit in nonprofit organizations remains large
The gap includes “new-to-the-organization” positions as well as vacancies due to baby boomer retirements (a trend that may have slowed with the downturn, but certainly not abated).

Message No. 2: Functional skills matter (and are transferable across sectors or domains)
Specific functional experience is the most highly rated criteria for hiring, with 79 percent of respondents rating it as “very important.” This builds on prior Bridgespan experience in executive recruiting that pointed to multidisciplinary project management skills, experience of doing more with fewer resources, and flexibility/adaptability as skills and attributes especially transferable to the nonprofit sector.

Message No. 3: Cultural fit is the deal breaker
A nonprofit organization’s appetite for new roles and its recognition of relevant functional expertise can put a prospective bridger on the short list. But Bridgespan’s study indicates that only cultural fit can get him the job, or make her successful once hired.

Message 4: Job boards, networks and search professionals most effectively connect talent to jobs
For nonprofit job candidates with relevant skills who have assessed their cultural fit, the study found that getting started means getting out there. And “there” is as much in the ether as in person: Surprisingly, for a sector that is notorious for relying on personal relationships, job boards surpassed external networking for first place as a way to reach candidates…

_____________________________________________

Kudos for this contribution to report author David Simms, head of Bridgespan’s Bridgestar initiative, as well as coauthor and consultant Carol Trager, who worked with City Square Associates to conduct and analyze the poll.

David R. Curry

Orlando Opera suspends operations; “future of the company” to be announced end of May

The 51-year run of Opera Orlando ended with the announcement that it would suspend operations effective April 30, 2009,  and that its Board “and a skeletal staff” will continue to review outstanding operational issues until the end of May, “at which time the public will be informed as to…the future of the company.”

The two major operational issues outstanding involve contracts with artists for future years and patrons who have already purchased tickets for next season. The company stated that there are “no outstanding debts to artists or craftsmen for services rendered for this or previous year.”

Elizabeth Maupin, Orlando Sentinel Staff Writer writing for the April 16, 2009 edition, quotes Opera America President Marc Scorca, who notes that Orlando becomes the “sixth professional company to go under or declare bankruptcy in recent months, including Baltimore; Hartford, Connecticut; Orange County, California.; western Massachusetts; and Augusta, Georgia.

Mr. Scorca notes that, in the case of Orlando, “We have not lost a company that was healthy at the time the recession hit. Companies that entered it in a state of fragility just haven’t had any place to turn.”

Orlando Opera Board Chair Joy Barrett Sabol said, “We undertook two major fund drives in recent years, the first in our 50th Anniversary and recently the “Carry The Voice” effort, which hoped to raise $500,000 to take the company forward; however, the lack of broad community support indicates that a resident professional opera company is not a priority of Orlando in these difficult times . . . this, irrespective of very fine productions and favorable reviews, particularly for the just-completed 2008-09 season.”

Jim Ireland, President & CEO of Orlando Opera, commented, “The recession of the past 18 months has resulted in lower ticket sales, reduced contributions, and defaults on pledged donations. In spite of significant cost reductions, Orlando Opera has not been able to break even on operations nor has it been able to eliminate its long-standing accumulated operating deficit.”

The announcement also notes that “Immediately, members of the Board will collaborate with United Arts, civic leaders, local foundations, performing arts groups and other supporters to explore possibilities for a way forward to include the potential of presenting our 2009-2010 season.

“Unfortunately, Orlando Opera will have to suspend its educational and training programs. Thousands of students have participated in Orlando Opera’s, summer activities, touring productions, dress rehearsals at Bob Carr, and educational programs. It is unfortunate that our young people will lose this introduction and exposure to the arts.”

The Orlando Opera website is basically dark except for the suspension of operations announcement. The announcement concludes by directing questions “or statements of concern” to the Board at a surface mail address (no email contact point).

Observation
Another very unhappy closing scene for an opera company: this one with a different plot twist from the Baltimore Opera, now proceeding with Chapter 7 dissolution.

According to the Orlando Sentinel report, the company announced three weeks ago that it could not continue if it did not raise US$500 thousand, but a recent three-week fund drive brought in only about US$25 thousand. The deficit stood at US$400 thousand as of last last summer, and the board “recently zeroed out its endowment to try to close the gap, but a US$200 thousand deficit remained last month,” the report said.

With a standing deficit of at least US$200 thousand and no cash flow and no real likelihood of raising additional funds, one surmises that the Board must be considering Chapter 11 protection. But Chapter 11 presumes there is some way forward to make reorganization viable.

With outstanding artist contracts to be resolved and season subscription revenues for 2009-10 presumably to be refunded, can there be many options besides Chapter 7 dissolution?

We certainly can understand the passion and commitment of the Board in trying to keep the company moving forward. But what was the “fail-safe” point that it should have clearly articulated for itself…that point which would have signaled that the responsible action was to seek Chapter 11 bankruptcy protection, or simply fold and elect Chapter 7 dissolution?

We do not see that proceeding with high hopes and best intentions – and experiencing unfortunate and unintended consequences (such as the cancellation of arts programs for “thousands of students”) – is equivalent to responsible governance or the exercise of fiduciary responsibility.

We will continue to monitor and post on Orlando Opera.

David R. Curry

Related Post
Baltimore Opera: Chapter 7 Liquidation Proceeding

Baltimore Opera: Chapter 7 Liquidation Proceeding

The final curtain is falling on the 58-years of the Baltimore Opera Company.

The Company’s website has been dark of late, except for the notice of its mid-March decision to pursue Chapter 7 liquidation instead of continuing the Chapter 11 bankruptcy protection and attempts to restructure. Earlier, the company had canceled the remainder of the 2008-09 season.

Last week, that notice was replaced with the headline and link to the Chapter 7 filing notice and the partially framed “This domain – www.baltimoreopera.com – is for sale.”

Tim Smith of the Baltimore Sun reported the Chapter 7 decision on 12 March 2009 (available online for fee from Baltimore Sun archive).

He quotes Baltimore Opera Board Chairman Allan Jensen:
“Maybe part of the problem was that we tried to put on world-class productions in a town that wasn’t ready to pay for them. Ticket sales take care of only a small part of the costs.

“It’s been a rough three months. Obviously, we’re disappointed. There were moist eyes at the board meeting, as you can imagine. I hope that a phoenix will arise from the ashes. My presumption is that, when economic times get better, a handful of people will get together to create a new opera company…”

We do not mean to be overly “forensic,” but here is what is being liquidated:

________________________________

104848/ 1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MARYLAND

IN RE: * BALTIMORE OPERA COMPANY, INC. * Case No.: 08-26265 NVA
Debtor * Chapter 7

* * * * * * * * * * * * *
NOTICE OF PUBLIC AUCTIONS AND/OR PRIVATE SALES PRIOR TO PUBLIC AUCTIONS FOR REAL PROPERTY KNOW AS 700 EAST MONUMENT STREET, BALTIMORE, MARYLAND 21202 AND OFFICE FURNITURE, BOOKS, MEMORABILIA, EQUIPMENT, COMPUTERS, PROPS, COSTUMES, AND SETS PROPERTY TO BE SOLD:

1) 700 East Monument St., Baltimore, Maryland 21202.
2) Office furniture, books, memorabilia, equipment, computers, web domain (www.baltimoreopera.com), and subscriber list, located at 110 West Mount Royal Avenue, Suite 306, Baltimore, Maryland 21201. Visit www.alexcooper.com for details and pictures of items.
3) Costumes, props, and sets from various operas located at 700 East Monument St., Baltimore, Maryland 21202. Visit www.alexcooper.com for details and pictures of items.
4) Remaining costumes, props, sets, office furnishings, and equipment located at 700 East Monument St., Baltimore, Maryland 21202.

…

________________________________________

The auction details will be available at http://realestate.alexcooper.com/featured/details/439/

We noted two things in the filing that gave us pause.

First, we noted the use of the word “memorabilia” in the filing summary, which causes us to be concerned about where “memorabilia” ends and  “historical archives” begins.

We raised a questions a few weeks ago with Baltimore Opera staff about the fate of its historical archives, which we would presume would include the papers of the Company and perhaps other documents, images and materials important to its history. That fate was not clear but exploratory discussion was underway.

We will post on this going forward, but hope that a responsible institution will step forward and secure this archive.

Second, we note that the Company’s subscriber list is also up for sale. This is an asset in the broadest sense, but non-profits should take note of how the courts view what is otherwise considered – and probably promised – to be private and not for sale in other circumstances.

We will post further on the role of the board as Chapter 7 processes unfold.

David R. Curry

Skoll Urgent Threats Fund formed, to be led by Larry Brilliant

We take special interest in the mission, governance and funding structure when new nonprofits/NGOs are formed. The overview below is excerpted from the Skoll Foundation media release.

The Skoll Urgent Threats Fund is a new organization formed by Jeff Skoll, founder and chairman of the Skoll Foundation and Participant Media. The Fund will focus on “identifying and supporting innovative high-impact initiatives to combat climate change, water scarcity, pandemics, nuclear proliferation and Middle East conflict.”

Dr. Larry Brilliant was named president of a new organization, and “will also serve as senior adviser to Skoll to ensure alignment of work on these urgent threats across Skoll’s business and philanthropic activities.” Brilliant has served on the Skoll Foundation board since 2007.

Dr. Brilliant “is renowned for his key role with the World Health Organization in eradicating smallpox from Asia. He was the founding executive director of Google.org, where he led the development of the innovative group’s strategy and, most recently, served as vice president of Google and chief philanthropy evangelist,” the media release noted.

Jeff Skoll commented, “Over the last few years, it has become increasingly apparent that humanity’s failure to address critical issues like climate change and nuclear proliferation aren’t just making these challenges more difficult; they’re putting life on the planet at risk. This new organization is designed to make serious headway on these issues by identifying and supporting the most innovative initiatives and solutions out there. I can’t think of anyone better prepared to shape and lead this effort than Larry Brilliant.”

The Skoll Urgent Threats Fund will by Jeff Skoll, “with a mandate to identify and support initiatives, organizations and individuals driving large-scale change on these global challenges.” The initial budget for the new initiative is $100 million, “with additional funds available over time.”

Sally Osberg, CEO of the Skoll Foundation, will join Brilliant and Skoll on the board of the new entity.

Comment
A visit to the Skoll Foundation website is helpful in providing a frame of reference for the ambitions of the Fund which intends to span the rather extraordinary spectrum from climate change to water scarcity to pandemics to nuclear proliferation to the Middle East conflict.

The initial US$100 million will need to stretch quite a bit, one imagines, to establish a presence in these diverse arena, but Dr. Brilliant may be among the best talents to make a try.

As wide as the span of its ambition, we must note that the Fund is as narrow in its governance. No outside board members were named, and two of the Fund’s directors are also employees. While that will make for efficient decision-making we wonder if the Fund can be properly governed by this structure.

The Skoll Foundation board and Skoll Fund board are comparably lean in terms of  scale and outside directors.

One cannot help but applaud the ambition and the generosity apparent in this announcement. We will monitor with great interest how this model is implemented and the good work it accomplishes.

David R. Curry

Sources
Skoll Foundation Media Release, 14 April 2009
http://www.skollfoundation.org/media/press_releases/internal/041409.asp

Responding to Economic Crisis: American Association of Museums (AAM)

We continue our survey of national service organizations in the arts, humanities and human services sectors, capturing how they seem to be supporting their constituents in the economic crisis.

The American Association of Museums (AAM) provides a page on its website which it titles: Finding Calm in Crisis: A Museum Survival Guide.

The introductory language for this survival guide – basically a singe page annotated bibliography of guides, tips and strategies mostly from consulting groups – suggests:

“Looking at the economic forecasts for 2009 does not give one much optimism for the year ahead. Navigating this uncertainty is difficult, but we believe you should not have to weather this storm alone. Now more than ever, AAM is committed to providing the resources you need. We encourage you to use this as an opportunity to focus on your mission, engage your community in creative ways, and make your voice heard about why your museum matters. Together we can not only weather this economic storm, but emerge even stronger.”

The resources in the Survival Guide are organized around themes and generally include 3-4 links to pdfs or documents:
- Seeing the Big Picture
- Fundraising
- Practical Tips & Ideas
- Management Advice & Strategy
- Downsizing & Retrenchment

AAM notes that members have access to additional resources in the organization’s Information Center. The one document from the survival guide that caught our attention was:

Considerations for AAM Accredited Museums Facing Retrenchment or Downsizing
Issued by the AAM Accreditation Commission on August 28, 2003 Reissued with updated Resources , November 20, 2008

“Downsizing and retrenchment can be responsible, necessary corrective actions in response to financial reductions. They are not, per se, inappropriate or grounds for loss of accredited status. When preparing for retrenchment, accredited museums (should):
- Focus on retaining their ability to fulfill their mission and serve their community
- Take actions consistent with the highest ethical, fiscal, and management standards in the museum field
- Carefully consider the effect of their actions on their staff, their community, and the collections they hold in trust for the public”

Nothing surprising here. But given the recent noise around museum de-accessioning plans and actions to address help financial challenges, we provide the extended language below:

_______________________

Collections
“Collections often receive special scrutiny during retrenchment, either because of the expense of maintaining them appropriately or because of their potential as financial assets. In considering the role of collections in retrenchment, museums are guided by the following principles:

“Collections are held in trust for the public, and a primary responsibility of the governing authority is to safeguard this trust. The museum may determine that it is unable, in the long run, to appropriately care for some parts of its collections. In such cases, the most responsible action may be to deaccession and transfer material to another suitable caretaker in an orderly manner that safeguards the collections and their documentation.

“Museums carefully consider whether it is appropriate for the material to remain in the public domain at another nonprofit institution, or whether it can responsibly be placed through public sale. However, deaccessioning is never a fast or simple solution. It may take a great deal of time and other resources to research the material in question, determine its provenance, identify any restrictions on the title, and arrange for an appropriate and safe transfer. In the short run, it may actually require additional expenditures on the part of the museum to conduct the necessary research, prepare the documentation, arrange for disposition, and affect the transfer. Deaccessioning is part of a long-term, thoughtful decision on the part of the museum about how to best fulfill its mission with available resources. It is conducted in accordance with standards and best practices in the field, and with the museum’s own code of ethics, collections planning, and collections policies.

“Various statements of ethics in the museum field prescribe what can be done with the funds resulting from deaccessioning. Accredited museums abide by the AAM Code of Ethics for Museums, and by any additional codes of ethics particular to their discipline.

“The AAM Code of Ethics for Museums specifies that proceeds from sales resulting from deaccessioning can only be used for acquisitions or direct care of collections. While the interpretation of “direct care” varies between museums and disciplines, there is a strong consensus that it does not include use of funds to pay operational expenses. The code of ethics of the Association of Art Museum Directors (AAMD) explicitly specifies that art museums can only use funds resulting from deaccessioning for the acquisition of new collections, and that of the American Association of State and Local History (AASLH) specifies that history museums can use such funds only for acquisition or preservation.

“There is increasing pressure on museums to capitalize their collections and to use them as collateral for financial loans to the museum. The AAM Code of Ethics for Museums requires that collections be “unencumbered,” which means that the collections cannot be used as collateral for a loan. The AAMD and AASLH codes of ethics also preclude using collections as collateral, and further, bar museums from capitalizing collections.

“A museum’s collections are valuable only insofar as they are accessible to the public and to scholars, and the information inherent in them is preserved through documentation and the knowledge of those who care for them. “Mothballing” collections, i.e., putting them in storage and eliminating or minimizing curation and use, may seem a desirable short-term strategy for cost reductions, but it carries measurable risks. Many kinds of collections are not stable in storage without constant monitoring and attention. Often, collections can be made accessible in a meaningful way only through the mediation of an experienced, knowledgeable staff that, once dismantled, may not easily be rebuilt.”

“…Museums operate in the public interest and hold their collections as a public trust. If a parent organization is considering downsizing or closing a museum, it has an ethical obligation to do so in a manner that safeguards the public’s interest. The fate of the collections must be carefully considered. Having taken on the obligation of caring for collections, the parent must plan to transfer this stewardship to another suitable caretaker in an orderly manner that safeguards the collections and their documentation. The new caretaker should be carefully chosen with attention to its ability to care for the collections and to continue to provide public and scholarly access. As discussed earlier in this document, this process may require additional resources in the short term and may not be a useful strategy for immediate cost savings.”

_______________________

This “transfer of stewardship” is a delicate business that has seen many missteps in the past. We certainly agree with the broad principles laid out here in this freshly reviewed document, but anticipate that such transfers will continue to be a special challenge for the field as the impacts of the economic crisis deepen in the short term.

Finally, we have noticed than annual conferences in other sectors have oriented their themes and substance around survival and adaption strategies.

AAM’s Annual Meeting in May in Philadelphia does not elect this opportunity with its theme “The Museum Experiment: Where Ideas Live!”. While the program for the conference is exciting, it is certainly a challenge to find a thread of sessions which seem to focus on keeping ideas alive.

David R. Curry

Nonprofit Mergers and Acquisitions: More Than a Tool for Tough Times/ Bridgespan

Alex Cortez, William Foster, Katie Smith Milway and their colleagues at Bridgespan have produced an important article: Nonprofit Mergers and Acquisitions: More Than a Tool for Tough Times.

The abstract from the Bridgespan site notes:
“Mergers and acquisitions (M&A) are much more common in the nonprofit world than most would think, as our study of 3,300 deals across four states over 11 years shows. But nonprofit mergers often come about through default-due to financial distress or leadership vacuums.

“At the same time, relatively few nonprofits are using M&A strategically, as a way to strengthen organizations’ effectiveness, spread best practices, expand reach, and to do all of this more cost-effectively. Yet the potential for M&A to create real value in the nonprofit sector exists, particularly if more philanthropists take on the mantle of matchmaker and help nonprofits explore and evaluate M&A opportunities…”

The authors make the key observation that:
“For one, there are no financial incentives driving deals, as there are in the for-profit arena-and that situation is unlikely to change. Moreover, there are few financial matchmakers” (as there are in the corporate world) to help leaders identify, explore and then finance potential merger options, and scarce guidance on how to evaluate potential deals and structure them so that they’ll work. These latter barriers could fall, however, if even a modest number of funders have the will to dismantle them.”

They note further that:
“Importantly, even in fields where M&A is strategically viable, it isn’t necessarily being used strategically…The question facing a nonprofit should not be, “Do we or do we not pursue M&A?” but rather “How do we best fulfill our organization’s mission and strategy to be effective, and is M&A a better option than other alternatives?” They discuss the Child & Family Services sector as “favorable” market” for M&A activity.

The types of strategic benefits they see nonprofits should seek include:
- Quality improvements in existing services (improved programs, training, supervision, etc.)
- Improved efficiency in existing services (better utilization of assets, reduced overhead, etc.)
- Increased funding (access to better fundraising capabilities, brand or new relationships)
- Development of new skills (programmatic expertise, broader leadership team, etc.)
- Entry into new geographies (overcome local barriers that are regulatory, community relationship, etc.)

Finally, the authors argue that M&A “can and will be more widely and effectively utilized by nonprofits if four things occur”:
- The strongest, highest-impact organizations begin to look to M&A as a possible avenue for fulfilling their strategies.
- Foundations, government, private funders and intermediaries are willing to provide funding to support due diligence and post-merger integration, both encouraging and enabling more organizations…to make upfront investments with long-term paybacks to the organizations’ efficiency and effectiveness.
- These same stakeholders invest in intermediaries, or “matchmakers,” that can create a more efficient “organizational marketplace” through which nonprofits can explore potential merger options safely…and
- More parties take steps to educate the sector by developing a broader knowledge base about when to think about M&A, how to explore it, and-if pursued-how and under what circumstances M&A can succeed in creating its intended value.

Comment
We highly recommend reading this article, presented in a crisp 10 pages of text.

We observe that the sample involved in the developing the report – 3,300 deals in four states over 11-years – might be limiting, but feel the underlying observations on the data resonate well with our experience.

We also observe that the phenomena of strategic partnerships, shared services experiments and other forms of collaboration are not specifically addressed, but may be an important area of further study to present a fuller picture of what is happening and what might well need to happen more to strengthen the non-profit community.

We commend Bridgespan and the authors on this timely and important work.

David R. Curry

Ten Non-Profits Funding Models/ Stanford Social Innovation Review

In Ten Non-Profits Funding Models, the authors – William Landes Foster, Peter Kim, & Barbara Christiansen – provide a very useful analysis of ten distinct non-profit funding models in active use as a step towards more rigorous analysis and understanding of the inherent “business models” driving non-profits overall.

In the crisp, seven-page analysis, they observe that “In the for-profit world…there is a much higher degree of clarity on financial issues. This is particularly true when it comes to understanding how different businesses operate, which can be encapsulated in a set of principles known as business models. Although there is no definitive list of corporate business models, there is enough agreement about what they mean that investors and executives alike can engage in sophisticated conversations about any given company’s strategy.

“When a person says that a company is a “low-cost provider” or a “fast follower,” the main outlines of how that company operates are pretty clear. Similarly, stating that a company is using “the razor and the razor blade” model describes a type of ongoing customer relationship that applies far beyond shaving products…

“…The nonprofit world rarely engages in equally clear and succinct conversations about an organization’s long- term funding strategy. That is because the different types of funding that fuel nonprofits have never been clearly defined. More than a poverty of language, this represents-and results in-a poverty of understanding and clear thinking.”

While the operational approaches outlined in the discussion about each of these funding models “commonly used by the largest nonprofits in the United States” are quite clear, the provisional titles for them may need some refinement:
- Heartfelt Connector
- Beneficiary Builder
- Member Motivator
- Big Bettor
- Public Provider
- Policy Innovator
- Beneficiary Broker
- Resource Recycler
- Market Maker
- Local Nationalizer

Of course, creating new terms of art is always tricky, but confining oneself to a two-word branding template may be overly constraining.

The important contribution here is a snapshot that allows non-profits and those that are in leadership, governance and funder roles, to reflect on what model may be in operation in their organization,  and what the upside and downside risks may be, particularly in the current economic crisis.

We note that there is a very useful summary chart on p.7 of the pdf which we present as a thumbnail below (obviously not able to be studied at this scale but more an invitation to actually review the document)

We suspect that some non-profits may find they actual have hybrids of these distinct models in play (and not to their benefit).

We commend the authors on this important contribution.

Source:
Ten Nonprofit Funding Models
By William Landes Foster, Peter Kim, & Barbara Christiansen
Stanford Social Innovation Review, Spring 2009
http://www.ssireview.org/pdf/2009SP_Feature_Foster_Kim_Christiansen.pdf

David R Curry

“America’s Nonprofits in Danger”/ Nonprofit Finance Fund (NFF) Survey

A study released by the Nonprofit Finance Fund (NFF) reports on a survey of 986 nonprofit leaders in markets nationwide which “captures the financial state and particular challenges facing these organizations.”

The bottom line: “America’s nonprofits, including the “lifeline” organizations that many depend on for food, shelter, and other basic services, are strained to the breaking point…and half expect the recession to have long-term or permanent negative effect on their organizations.”

While the tabular data in the Full Survey Results present the data sets, we recommend a quick review of the Summary Survey Findings which distills key findings into a powerpoint style presentation.

NFF summarizes the key findings to include:
- Only 12% expect to operate above break-even this year.
- Just 16% anticipate being able to cover their operating expenses in both 2009 and 2010.
- 31% don’t have enough operating cash in hand to cover more that one month of expenses, and another 31% have less than three months’ worth.
- 52% of respondents expect the recession to have a long-term (2+ years) or permanent negative financial effect on their organizations.
- 93% of lifeline organizations that provide essential services anticipate an increase in demand in 2009.

Clara Miller, President and CEO of Nonprofit Finance Fund, comments, “The survey reveals the precarious state of a sector that is continually asked to do more with less, and brings a long-standing problem into sharp relief. Lifeline organizations, 91% of which focus on serving vulnerable populations, simply will not be around to provide critical services if we continue with current practices. We must free the entire sector from the archaic assumptions and harmful constraints that keep many organizations perpetually on the brink of survival, and especially at risk in times of recession.”

NFF notes that nonprofits are taking a range of steps to weather the recession. When asked to identify actions taken within the past 12 months or planned for the next 12 months to address the financial crisis:
- 39% identified “reduce or eliminate programs”
- 41% identified “reduce staff or salaries” and
- 23 % identified “delay payments to vendors.”

We found particularly interesting a chart from the Summary Survey Results identifying the tools non-profit leaders felt were most needed.

To see the full summary results click on the chart above

We find particularly interesting the interest expressed in merger feasibility analysis. We believe that exploring “strategic alternatives” – which may include mergers & acquisitions as well as strategic alliances and other forms of formal collaboration – may play an increasingly important role as the full weight of the downturn is felt across the non-profit sector.

Sources:
“Nonprofit Finance Fund Survey: America’s Nonprofits in Danger”
NFF Media Release, 26 March 2009
http://www.nonprofitfinancefund.org/content.php?autoID=166

NFF Summary Report: Nonprofit Survey Results, March 26, 2009
http://www.nonprofitfinancefund.org/docs/2009/SurveyResultsSummary
(see also link to full survey tabular data report) http://www.nonprofitfinancefund.org/docs/2009/SurveyResults.pdf

David R Curry

Response to Economic Crisis: League of American Orchestras

We continue our survey of national and regional service organization and their constituent support programs and strategies in the face of the economic crisis.

The League of American Orchestras offers what they title a Member Support Package to assist “members in addressing the extraordinary challenges posed by this economic downturn. While not everything will be germane to your situation or your organization’s level of experience, you may want to share some of these materials and opportunities with members of your staff and/or board.”

The support package consists of four elements:

- Guidance for Managing During Economic Downturns,  a 21-page report prepared by League staff, focused on three areas: Recession Data Trends, a summary of recent performance indicators; a Financial Tool Kit For Executive Directors with a range of ideas and check lists for action, and a Communications Tool Kit for Executive Directors, providing support for work with media and communications processes overall.

- A webinar – Financial Management In Tough Economic Times – “based on the well-received presentation at last June’s NPAC Convention by the League’s interim CFO, Steven Bronfenbrenner (principal, B-Squared Consulting).

- Guidance for Media Interviews on Orchestras and the Economy , prepared by Judith Kurnick, League Vice President for Strategic Communications.

- additional economy resources available at CCS which encompass a set of national and regional/urban assessments of philanthropy and non-profits in the current crisis.

The League has also focused its national conference in June 2009 on the theme: The New Reality: Economics & Public Value

Jesse Rosen, President and CEO,  League of American Orchestras, notes, “This year’s National Conference has one goal: to support our members during these difficult times. It will address the issues that challenge the field and enable the conversations that help solve our problems.”

The New Reality: Economics & Public Value “will address ways to achieve the sustainability, vibrancy, entrepreneurship, and partnership that orchestras must demonstrate in a turbulent and uncertain climate.

“Our diverse and resilient field knows better than most how to respond to adversity, be it natural disaster, hunger in our communities, or economic downturn. The power of music inspires us, moves us, and provides cathartic unity.”

Cathartic unity indeed.

Related Post:
Response to Economic Crisis: Dance/USA 29 March 2009

David R Curry

NACD Key Principles: A framework for non-profit governance?

We are vitally interested in documenting, and helping articulate if we can, best practices for non-profit governance.

We recognize, of course, the important differences between governance of non-profit organizations and publicly-traded corporations. But we also recognize that broad underlying principles of governance – like the primacy of fiduciary responsibility and a duty of care proceeding from the public trust – have much in common.

So we have been reflecting on the “Key Agreed Principles to Strengthen Corporate Governance of U.S. Publicly Traded Companies” issued late in 2008 by the National Association of Corporate Directors.

Below, we provide some language from the report that establishes the context for this work, then we present the ten principles themselves, adding some selected passages fro the discussion which attends each of them.

In reading the principles and the associated italicized text we have excerpted, we have been replacing words like “corporate” and “publicly-traded” and with “constituents” or “non-profit” to test whether the ideas presented are pertinent and valuable as part of a framework for non-profit board governance.

We believe that there is much that is pertinent and valuable.

Language from the report introduction and the cover letter to NACD Members:

_______________________________

“The current economic crisis has eroded public and investor confidence in corporate governance. American corporations must take action to restore the public trust. For the past year, we have worked with business leaders and shareholder groups to create the attached set of Principles to serve as a framework for strengthening governance for U.S. publicly traded companies.

“Our Agreed Principles are intended to provide a blueprint to you and thereby to help improve the quality of discussion and debate about governance issues moving forward. These Principles do not in any way undermine or negate further discussion, debate, and development of governance practices. We hope that the Principles will encourage boards, managers, and shareholders to eschew a check-the-box approach in favor of thoughtful governance, tailored by boards themselves to their particular circumstances and embraced by all stakeholders.

“We view these Principles as a first step in strengthening corporate governance. We will continue this work through a national effort that will identify and advocate leading practices that empower board leadership, particularly in the areas of oversight of risk, corporate strategy, compensation, and transparency. Central to this effort will be our continued commitment to educate directors and other stakeholders in these leading practices.”

“The Key Agreed Principles that follow are grounded in the common interest of shareholders, boards, and management teams in the corporate objective of long-term value creation (through ethical and legal means), the accountability of management to the board, and ultimately the accountability of the board to shareholders for such long-term value creation.

“The Principles provide a framework for board leadership and oversight in the especially critical areas of strategic planning, risk oversight, executive compensation, and transparency.

“Principle I emphasizes the responsibility of every board to design its own governance structure and practices, and Principle II emphasizes the importance of the board explaining how it has tailored governance structures and practices to meet its own needs. Principles II through X describe the key fundamentals that boards should take into account in designing and explaining structures and practices.”

_________________________________

The Key Agreed Principles

I. Board Responsibility for Governance
Governance structures and practices should be designed by the board to position the board to fulfill its duties effectively and efficiently.

“…The board’s fiduciary objective is long-term value creation for the corporation; governance form and process should follow…”

“…the board must order its governance structures and processes, providing both oversight and guidance to management regarding strategic planning, risk assessment and management, and corporate performance. Serving as a director is demanding and-in addition to significant substantive knowledge and experience relevant to the business and governance needs of the company-requires integrity, objectivity, judgment, diplomacy, and courage….”

II. Corporate Governance Transparency
Governance structures and practices should be transparent- and transparency is more important than strictly following any particular set of best practice recommendations.

“…Boards should tailor governance structures and practices to the needs of the company in a pragmatic search for what is most effective and efficient….”

“…Every board should explain, in proxy materials and other communications with shareholders, why the governance structures and practices it has developed are best suited to the company…”

“…it is the disclosure of governance structures and practices generally and the rationale for divergences from widely accepted best practices that is important…”

III. Director Competency & Commitment
Governance structures and practices should be designed to ensure the competency and commitment of directors.

“…A board’s effectiveness depends on the competency and commitment of its individual members, their understanding of the role of a fiduciary and their ability to work together as a group…”

“…However, an effective board is far more than the sum of its parts: it should bring together a variety of skill sets, experiences, and viewpoints in an environment conducive to reaching consensus decisions after a full and vigorous discussion from diverse perspectives…”

IV. Board Accountability & Objectivity
Governance structures and practices should be designed to ensure the accountability of the board to shareholders and the objectivity of board decisions.

“…Boards are accountable to shareholders for the governance and performance of the corporation, and must provide active oversight of the management of the corporation. Accountability in the oversight of the corporation is premised on the ability of the board to be objective and distinct from management…”

“…Disclosure serves as a significant disciplining force for board independence decisions…”

“…Executive sessions-usually including both independent directors and those outside directors who do not qualify as independent- without members of management present should be held regularly; more often than once or twice a year. Such sessions provide the opportunity for open discussion of management’s performance and management proposals regarding strategies and actions. Executive sessions are critical in establishing an appropriate environment of objectivity and candor…”

V. Independent Board Leadership
Governance structures and practices should be designed to provide some form of leadership for the board distinct from management.

” Accountability in the oversight of the corporation is premised on the ability of the board to be objective and distinct from management.”

VI. Integrity, Ethics & Responsibility
Governance structures and practices should be designed to promote an appropriate corporate culture of integrity, ethics, and corporate social responsibility.

“…The board plays a key role in assuring that an appropriate corporate culture is developed, by communicating to senior management the seriousness with which the board views the matter, defining the parameters of the desired culture, reviewing efforts of management to inculcate the agreed culture (including but not limited to review of compliance and ethics programs) and continually assessing the integrity and ethics of senior management…”

VII. Attention to Information, Agenda & Strategy
Governance structures and practices should be designed to support the board in determining its own priorities, resultant agenda, and information needs and to assist the board in focusing on strategy (and associated risks).

“…Boards must develop their own viewpoints to provide management with meaningful strategic guidance and support and to focus their own attention appropriately. Therefore, the board must be actively engaged in determining its own priorities, agenda and information needs…”

“…While directors must-and should-rely on management for information about the company, they need to recognize that their ability to serve as fiduciaries depends on the degree to which they can bring objective judgment to bear. Therefore, directors cannot be unduly reliant on management for determining the board’s priorities and related agenda, and information needs…”

“…Directors should strive for a constructive tension in discussions with management about strategy, performance, and the underlying assumptions upon which management proposals are based. Directors should actively participate in defining the benchmarks by which to assess success, and then monitor performance against those benchmarks…”

VIII. Protection Against Board Entrenchment
Governance structures and practices should encourage the board to refresh itself.

“…The board needs to ensure that it is positioned to change and evolve with the needs of the company. This requires that directorship never be viewed as a sinecure…”

IX. Shareholder Input in Director Selection
Governance structures and practices should be designed to encourage meaningful shareholder involvement in the selection of directors.
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X. Shareholder Communications
Governance structures and practices should be designed to encourage communication with shareholders.
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More at: www.nacdonline.org/keyprinciples

Comment
We will continue to post about these principles and their applicability to non-profit governance in the future. We invite your comments and ideas in this regard.

David R. Curry