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Organizations Must Chart Their Own Courses

Hull House shows boards must be strategic in thinking

I suspect all of us were startled to learn, in January 2012, that the Jane Addams Hull House Association, one of the early settlement houses in the United States, founded 123 years ago, had closed its doors.* Unable to meet its financial obligations and or find funds to stabilize its precarious position, the board of directors made the decision to discontinue operations, declare bankruptcy, and identify other organizations to assume responsibility for existing programs.

Hull House was founded by settlement house movement pioneer Jane Addams as an initiative to assist new immigrants, but it had expanded the breadth and depth of programming as community needs grew and funding became available. According to reports published last year in The Chronicle of Philanthropy, Hull House, at its high point, had an operating budget of $40 million. At the time of its closing, the operating budget was $23 million. Outstanding obligations exceeded capacity to meet them. (1)

Two Views of the Same Landscape

Nonprofit organizations must understand what accounts for this reversal of fortune for an organization that was seen as an enduring example of the best that nonprofit organizations have to offer—staying true to its mission, adapting to changing times and expectations, and reaching out in a myriad of ways to strengthen the fabric of the community.

I believe the answer to that question is contained in the two quotes below that appeared in an article published Feb. 2, 2012 by The Chronicle of Philanthropy. (2):

“’There were pivotal moments during the last decade when the board should have made different, tougher decisions, but didn’t,’ says Mr. (Stephen) Saunders, an architect (Chair). The charity’s staff members kept a positive attitude, he says, and the board took its cues from them.” 

“’We had new board members who were more corporate in their experience,’ says Mr. (Clarence) Wood (retired CEO), who has worked for charities for 45 years. ‘They didn’t understand that the reason the staff members like me were staying positive in attitude was that we are very used to social-service agencies being always on the brink of destruction. They bailed out too soon.’”

These comments reflect two different views of governance—strategic and operational: Saunders suggests that the time to anticipate the current course of events and implement actions to avert them began 10 years ago. Wood cites the organization’s past success in managing crises. Well, what is the board’s role—strategy or management?

Funding Cannot Be the Compass

There certainly is historical precedent that explains board engagement in operations. In early charity models, volunteers did the work. However, as services grew and became more complex, volunteers gradually turned over the execution to staff, while they continued their direct involvement by supervising many aspects of day-to-day operations.

As fundraising became more organized through entities such as United Way and its predecessors, organizations began to rely more heavily on these sources of predictable support. Boards closely monitored operations to assure that day-to-day performance and financial management satisfied the expectations of these funders. With the growth of government funding, organizations grew in size and complexity—and boards continued to exercise operational oversight.

In these earlier times, when ongoing funding was relatively predictable, organizations relied on funding sources to chart strategic direction. In effect, organizations were not carrying out their own visions for their communities; they were agents for carrying out the visions of their primary funders. The quid pro quo was, “do a good job and we’ll continue to support your good work.” Boards focused on ensuring that a good job was being done.

But, times have changed. There are no longer predictable funders that will assure the future of organizations committed to child and family services. What is predictable about nonprofit funding sources is that they will continue to be unpredictable. While organizations were historically conditioned to rely on others to chart strategic direction, that responsibility now rests with each individual entity. Nonprofits must take responsibility for ensuring that their visions for their communities are realized. They must take responsibility to ensure the future viability of their important community resources.

Planning for Tomorrow, Moving Forward Today

In order to do this, boards must become strategic. The simplest definition of a strategic board is this—it is one that works to ensure the future of the organization. The board is planning for tomorrow, while management is executing the programs of today. All organizations are subject to review by various licensing and regulatory bodies, as well as audits from various funding sources. Current operations are overseen by many interested parties. The most important contribution a board can make is to determine best estimates of future conditions and orient the organization so that it is prepared to respond when those conditions occur.

This is not an easy task. It is comparable to traveling down an unfamiliar road without a map. Focusing on what is being done today is much easier. But, to place the board’s attention there diminishes its capacity to address ever-changing conditions and sustainability for the future. And, as we see with Hull House, it can lead to very undesirable results for the community.

Most boards and executives will state that they have strategic plans and that they are strategically driven. However, a review of board meeting minutes often suggests otherwise. At the Alliance for Children and Families’ Board Chair/CEO Institute held in Chicago last July, teams were asked to bring minutes of past board meetings with them. After substantive discussion regarding strategic leadership, the teams were asked to evaluate their minutes and report on their assessments of how much of the agenda focused on strategy and how much on operations. All teams, regardless of budget, tenure of executive, or region of the country, reported that 80 percent of board time was spent managing today, and 20 percent planning for tomorrow. At the end of the institute, all reported that they were resolved to reverse that ratio.

The right-hand sidebar identifies key components of strategic governance, as defined in current literature, and areas that are not considered strategic governance. Boards have a responsibility to contribute to, and raise funds for, the organization. Likewise, it is often desirable to tap specialized skills that board members bring to the organization. But, these activities, while meaningful and important, should not be mistaken for governance. They are competencies and resources that enhance current operations, but they do not have direct bearing on future viability, which is the primary responsibility of a board of directors. How would you rate your board meetings based on these governance and non-governance characteristics?

*This article has been modified from its original version to reflect that the Jane Addams Hull House Association was not the first settlement house in the United States. University Settlement was the first settlement house and continues to be a leader in the movement.


ENDNOTES:

1. Read the full article, “Some Fear Hull House Closure Is an Omen for Struggling Charities,” published Feb. 2, 2012 in The Chronicle of Philanthropy.
2. Ibid.

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