Steering Towards Survival: How Nonprofit Boards Can Lead Their Organizations Through COVID-19
In the midst of the COVID-19 crisis, nonprofit boards must provide the crucial leadership needed to steer their organizations towards survival. As the world responds to the implications of this crisis, many nonprofits are struggling with the balance of serving their communities while keeping themselves afloat. During this webinar, Anne Wallestad of BoardSource, and Patricia Q. Connolly and Teresa Harrison of the Gupta Governance Institute discuss practical steps nonprofit board members can take to steer their organizations towards survival and find opportunity through crisis.
Patricia Connolly: Hello, my name is Patti Connolly and I am the Executive Director of the Raj and Kamla Gupta Governance Institute at Drexel University’s LeBow College of Business. Welcome back to BoardSpeak, our webinar series that brings you practical insights and insightful discussions. Today I’m pleased to welcome Anne Wallestad, President and CEO of BoardSource, which is a recognized leader in nonprofit board leadership and educates nonprofit leaders from across the country and throughout the world. I’m also joined by my colleague, Dr. Teresa Harrison, who is the Academic Director for Nonprofit Governance at the Gupta Governance Institute. Teresa is an applied microeconomist with interest in nonprofit and hospital behavior. Teresa’s research on these two industries focuses on the dynamic issues that include location decisions, entry and exit strategies, mergers and growth. I’ve asked Anne and Teresa to provide us with their insights on how nonprofit boards can provide the crucial leadership needed to steer their organizations towards survival. Anne and Teresa, thank you so much for joining me today.
I know we agree that never before have nonprofit leaders been more in need of the foresight and seasoned judgment that a well-functioning board of directors can provide. However, some nonprofits may not fully be tapping into their expertise. Anne, let me begin with you. I’ve had many of the Gupta Governance Institute stakeholders reaching out and asking us about the board’s role in addressing COVID-19. I’m interested to hear what you’ve been hearing, and what are your thoughts on what the nonprofits board’s role is in this crisis?
Anne Wallestad: At BoardSource, we are seeing up close and personal how boards and executives are grappling with the realities of COVID-19. We have what amounts to a virtual helpline and the questions that we are receiving really tell the story of how desperate some nonprofit situations are, and how high stakes the things are that they’re facing, things that in normal times would have been a manageable board level challenge. We’re getting questions about loans and funding that might be available to help weather the storm, questions about decision making and legal implications for staff layoffs and furloughs, questions about how to responsibly wind down the organization if it’s already clear that they won’t survive, questions about how to get board members attention to urgent organizational issues when CEOs are dealing with their own organizational fires, and a whole lot of questions about how to facilitate the board’s work in a virtual environment.
At BoardSource, we’re working hard to get leaders the support that they need by connecting them with resources, tools, and guidance from experts. But, the sad reality for so many of these organizations is that they just don’t have the resources that they need to make it through this crisis. Without intervention from donors, funders, or the government, they won’t survive. But, thinking about what that means for boards and their role in this moment; boards are designed to be a stabilizing organizational force, which of course is especially important during a crisis. Boards have the opportunity to step back and look at the big picture, to take a long view and do their best to focus on what’s most important. These are all things that boards are designed to do and that are important in a moment like this. This is especially important if the executive is facing desperate realities, as we know so many are, which can make it incredibly difficult to access the perspective that is needed to make good long-term decisions.
With that in mind, I would offer a few pieces of general advice to boards. Boards are facing a wide range of situations, and it’s not one size fits all in terms of what boards need to be doing in this moment. However, I do think there are some general things that apply to all organizations, and I think this is really important - don’t panic, do your best to bring calm to your deliberations and discussions with the chief executive as much as you possibly can. They need that from the board in this moment, and it’s important that boards take a deep breath, and don’t add fuel to the fire in terms of panic.
Second, I would say that boards have an opportunity and it’s very valuable for them to ask questions and focus on being curious versus directive. Boards need to have confidence that there is a solid plan and they should be asking probing questions about places that they might have uncertainty, concern or lack of confidence. Many organizations are facing tough decisions about staffing and programs, and boards need to have clarity about what the plan is, what is being prioritized, and why. Unless the executive’s leadership is really faltering, it’s not the board’s job to get in there and create the plan itself. The question should not be, for a board member, “what would I do if I were the executive?”, it needs to be, “do I think this is a good solid plan that puts the organization and those that we serve first?”.
Finally, board members need to listen, offer to help, and provide support and backup. They need to listen deeply to what is the executive saying that they need, what are they teeing up in terms of places that the board can be helpful, and really make a difference. Boards need to understand that executives are in triaged mode. Focusing on what helps and makes a difference for them is what needs to be the priority in this moment, rather than a great idea that would take a lot of time and resources to pursue. A big value add that the board can provide is just support and backup to the chief executive as they’re executing on high stakes and potentially challenging plans. These are tough times for organizational leaders, and the support and care of the board can really make a big difference in helping them get through it.
Teresa Harrison: I’d come back to reemphasize a few of the points you made, Anne. This is a hard time, and for the most part unexpected. We knew that a recession was probably coming in the near future, but not this near. The downturn and the enormity of all the aspects that nonprofits are dealing with is something that all of the risk management in the world would not necessarily have anticipated. I’m so glad that we’re having this conversation because I do think your point is right; that the board needs to meet the organization where they are. There has been suggestion of talking about how much cash do you have on hand, and those are good questions to be asking. However, the reality is some nonprofits may have found themselves in the case where that isn’t their reality at this point. Being able to ask those good and thoughtful questions is a key place that the board can play a big role. In such a crisis like this, it’s so easy to get completely absorbed with the day-to-day technical issues that are clearly important and have to be taken care of. At the same time, the board is more important than ever in helping the CEO and other leaders focus on the strategy, continue to provide insight, ask thoughtful questions to help elicit that focus on strategy and longer term solutions that may help even though that may not be the tactical components right now, but really do help in terms of thinking about the survivability of the organization long-term.
Connolly: Thank you, Teresa. I think now, more than ever, it’s so critical for boards and the organization to clearly communicate its value proposition to their stakeholders. How can a board assist the leadership in getting that message out to clearly communicate the value proposition at this time?
Wallestad: I would start by saying that I think there’s a bit of a paradox here because for many organizations, nothing has really changed in terms of the value proposition. They exist for the same reason and are doing largely the same work. With that said, the context in which we’re all operating has changed dramatically. That means that everything has changed. I think that organizational leaders, including boards, really need to spend some time making sense of “what does this moment mean for us as an organization?”, and “what does that mean in terms of how we might need to adapt and change, specifically as it relates to the way that we are communicating with and engaging stakeholders?”. That is broad, but I think it’s particularly important to think about it in relationship to funders and donors who are engaging with our organizations. If organizations are facing tough financial times, this is the time that we want to be raising funds, but it’s also a unique time to think about reaching out to donors and funders about financial support.
For some organizations there’s an urgent need to communicate with stakeholders about how their work is addressing the pandemic, and to create opportunities for donors and others to be supportive of those efforts. For other organizations, there’s a need to help current donors and funders understand how the pandemic is impacting the organization financially and what donors can do to help keep them strong with the acknowledgement and sensitivity that their organization’s needs just may not be front of mind for those with whom they’re communicating. To me, it is really important in a moment like this for boards, executives, and staff, to be honest and empathetic in the way that you are engaging with stakeholders, and acknowledging that this is a moment that can build or erode trust. Operating in a “business as usual way” will very likely feel “off” to your stakeholders, as would anything that seems opportunistic. Carefully weighing your outreach through the lens of your donors and stakeholders and making choices that prioritize the long-term relationship versus short-term needs, is essential.
Connolly: It’s so hard to balance the immediacy of the short-term need, while always being mindful to keep the long-term in perspective. Theresa, what are your thoughts on this?
Harrison: I would come back to what I was saying before about “asking the right questions”. I have three that I think would be good for the board to help the organization think through their core values, their opportunities, and what they can do and should do during this time. It’s basic, but to help them try to re-center and come back to the main identity of the nonprofit, the board can start by just helping the organization remember “what is it that we’re good at?”. That may very well be a few things. To Anne’s point, “what are the things that we’re good at that are key services that are needed right now?”. For some organizations, it may be, that there might not be that immediacy, but they can talk about what that value is in the long-term, and make sure that they have an identity and a clear way to articulate that to their donors.
To put those two together and think about the intersection of “what is it that this organization can uniquely provide that others can’t?”. That can provide a good opportunity for recognizing, in a situation where resources are quite constrained, “what should I focus on?”, “what should my organization focus on that provides unique value?”. Then, being able to communicate that to donors hones the message to both new and existing donors and lets them understand how they can contribute to your organization by providing funding. This is a time when traditional and existing revenue that the organizations have been depending on may very well be significantly reduced, or in some places, completely eliminated. Asking those three questions may help the organization rethink and re-imagine how they can use that value to potentially leverage new revenue streams or new ways to reach existing and new donors.
Connolly: As you pointed out, the revenue streams are definitely drying up, and as we know, nonprofits are desperately lacking the funds that they need. What do you see as a next best option for them to fill the gap now and to move forward? Keeping in mind, there’s a definite short-term need, but a long-term focus.
Harrison: Many nonprofits may very well have already applied for, and perhaps even secured, some relief funding from The Cares Act. This is something that has been a relief to some nonprofits, but not to all. In this case though, it may be that either wasn’t available or as we know, the resources for the funds there have already been exhausted. It may be a good time to think about potential credit lines if they already exist. This is going to vary from organization to organization, and their own financial situation at this point. But this is also a key place where the board can help provide insight on whether securing additional credit or borrowing at this time makes sense from a long-term risk management standpoint. It may very well be that getting short-term loans or bridge funding, perhaps even in addition to what was allowed through The Cares Act, may be a possibility that they want to consider. But once again, that is going to vary by organization, and they need to think through that carefully.
I would encourage from that standpoint that the consideration is - you want to make sure that anything that you’re doing that is providing additional credit or leverage to the organization is being used specifically for long-term strategy and in key places where the organization can provide a long-term value. I think linking it to that, and thinking about the core principles of the organization, will help the organization, the board, and the CEO, make decisions about whether or not that is a fruitful source of relief at this time.
Wallestad: To echo what you are saying, yes, unfortunately the funds have been exhausted. I think there are a lot of us in the sector who are hopeful that there may be additional funds that are made available, but we can’t count on that obviously as a sector or as individual organizational leaders. But that is something that may be helpful to organizations in the future, even though this initial tranche been expended. I would just add more broadly on the concept of debt - reinforcing that the boards do need to be thoughtful about how they take on debt and carefully consider the assumptions behind the rationale for doing so. From my perspective, assuming that a new financial reality will come soon without a sense of how that will happen, may be unwise. It can unfortunately delay the organization from making important changes to its operating model or cost ratios that would actually be much more helpful in the long-term, even if that’s hard to consider. So, centering on the board’s role, I think it’s important that boards engage with executives about what are those assumptions and is a loan or taking on debt the right strategy to help navigate us through this. Sometimes it is, but sometimes it might not be.
Connolly: Thank you both for that. There are people who feel very strongly about collaboration and nonprofits collaborating with each other. Some use the terms merger or strategic partnerships. Is this the right time to identify new partners to collaborate with, or for boards to have that discussion?
Wallestad: This is a big ‘maybe’ from my perspective. We at BoardSource are big believers in the positive potential of merger partnerships. That’s not to say that we think that it’s something that everybody should do, but we think it’s a valuable practice for boards to really think openly and optimistically about what might a partnership up to, and including, merger, enable us to do. I think that unfortunately, in the nonprofit sector, a lot of boards and staff see mergers as failure instead of as opportunity. I think that holds us back from doing some things as organizations and as a collective that could be smart, strategic, and good for the people in communities that we seek to serve. So, with that as context, I do think that sometimes crisis has a way of helping people break through some of the barriers or impediments to change that may seem insurmountable under normal circumstances.
Certainly, this is a crisis that could do that for some organizations. All that said, mergers and other collaborations take time and resources to pursue and to implement, and crisis often means that an organization is short on both of those things. It can be really difficult to move forward a collaboration or partnership or merger in this context. But I do think it’s something that boards should be thinking about and considering early on so that if it does make sense, if there is a good opportunity, they are more likely to have the resources that they need to implement it. Thinking about a merger or another structural collaboration is not what you do when you run out of all other options, and certainly not what you do when you run out of all your money. By then it’s too late to dissolve responsibly, let alone collaborate with another entity.
Connolly: Teresa, how do you feel about this? I know we have had countless discussions about strategic collaboration, but how would you advise at this point?
Harrison: I think this does present us opportunity and just as Anne said, these types of strategic alliances, mergers, and formal collaborations, do take time. Because the organization is really having to think about its own core values, core identities, and what it wants to focus on now, that can allow better insight into how other organizations may either complement what they do or perhaps even allows you to see the honest truth that maybe some other organizations are bringing strength in a particular area that you had been serving. I agree with what you were saying that a merger isn’t a failure. At this time, it’s critical that all organizations think about “how can I maximize the impact that I am having for my constituency, and for the overall society?”. As long as they’re thinking through that lens, even if that means letting go of certain parts of the services, a crisis can help bring clarity to that.
My hope is that, for some organizations, it does help them have those tough conversations. Sometimes the obstacles to mergers or collaborations, they have perhaps been more superficial in nature. Now is a good time, some of that gets wiped away in a crisis scenario. So, it may very well be an opportunity to have conversations that you couldn’t, or even for the board to get involved in those types of conversations in a way that either they couldn’t before, or they wouldn’t before. I think it presents a great possibility to put that in is as you’re thinking about your strategies moving forward.
Connolly: We talked today a lot about the challenges that boards are facing. Teresa and Anne, what would you say is the one thing that a board should focus on and take away from today’s discussion? Not just a board, but also investors and people engaged with nonprofits, what advice would you give?
Wallestad: When I think about the opportunity of this collective experience, though it’s hard to think about opportunity in a moment like this, but of course we know that there is. I think that a crisis like this really reveals who we are as people and as organizations. As a result of that, it creates tremendous opportunities to build deep, trusting relationships in a way that I hope will be positive for a lot of organizations and leaders. People have long memories about how they are treated in a moment of crisis or pain, and that creates space for organizations and leaders to forge bonds of trust and understanding that can be powerful and long lasting. In the context of this conversation I think about the trust, understanding, and candor that could come from the way that boards and chief executives are engaging with, and supporting each other through this crisis. I think about the loyalty and confidence that can be created between employees and their organizational leaders when it’s clear that employee safety and health are being prioritized. I think about the appreciation and respect that can be cultivated between donors and the organization when an organization is honest and open about what this moment means for them and the people in communities that they serve. This might all sound a little squishy and perhaps a little bit idealistic, but I think these things really matter a lot. When you look at how much trust in nonprofit organizations has plummeted in recent years, I think this is a moment where as a sector, as organizations, and as individual leaders, we have an opportunity to show what we’re really made of, and rebuild trust in a way that is quite profound.
Connolly: Thank you. Anne. I don’t think that’s squishy at all. I think it’s a positive way for nonprofits to think. Teresa, what advice would you give?
Harrison: This is not an easy time, there are a lot of hard questions and hard decisions. Focusing on trust I think is right. It is a time of being able to reflect; oftentimes you don’t have this time to reflect because you’re dealing with a crisis situation. At the same time, you can use this to reevaluate and potentially even re-imagine what your value is overall to your constituency. This is a time for the board to help think about that core value and that core identity. The more that you understand that and articulate it, I think that just goes hand-in-hand with the trust that Anne was mentioning. There is opportunity in coming out of this recognizing where your key strengths are, and how you function in this type of environment. This can really help set the stage for what’s to come in future years. It’s hard to see the light at the end of the tunnel, particularly where we are now, but asking the types of questions that we’ve thought about here, thinking about that overall strategy will help organizations maximize their value in the long run.
Connolly: That is excellent advice to end this conversation. I also just want to add that I think it’s the opportunity for nonprofit boards to step up their game and guide their organizations toward the next normal. I want to thank the both of you so much for taking your time today to chat. I appreciate you sharing your insights with the Gupta Governance Institute’s stakeholders. I also want to thank our audience for taking the time to listen to this important discussion and know that we have provided you with some practical suggestions that should assist you in helping your organization navigate this crisis. I would like to please ask you to fill out the response form in the email you have received to provide feedback on not only this discussion, but what are topics that you would like to hear about? On behalf of the Raj and Kamla Gupta Governance Institute at Drexel University, thank you so much, and take care.