Risk Management through Organizational Governance, Network Citizenship, and Collaboration

Risk Management through Organizational Governance,

Network Citizenship, andCollaboration

Agenda

Organizational Governance

• Good Governance is really about Risk Management

• What are the duties of board members?

• UWW Membership Requirement C

• The Nine Required Elements of Governance

Network Citizenship• The National Landscape

• UWW’s Perspective

Collaboration• Why even talk about Collaboration?

• The Collaborative Continuum

• The Top 10 Essentials for Collaboration

• Something New… The Collaboration Toolkit

“The minute you think you've got it made, disaster is just around the corner.”

– Joe Paterno

Good Governance is really about Risk Management

Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.

www.wikipedia.org

Standards of Excellence5.4: Risk Management United Way is intentional and comprehensive in the protection of the organization’s assets (brand, financial, property, and people).

Kinds of Risk Management

• Asset protection

–D&O Liability

–General Liability

–Worker’s Compensation

–Personal Property

–Typically consult with professionals (insurance, legal, etc.) for advice on appropriate coverage

• Financial

– Internal controls

• Mission

–Brand management

–Be/do/say

What is the linchpin to risk management?

Sound and effective governance… Boards need to manage risk right and manage the right risks.

What does this mean for United Way governing boards?

Good Governance for United Ways

• Requirement C: United Ways will have an active, responsible, and voluntary governing body, which ensures effective governance over the policies and financial resources of the organization.

Implementation of Membership Requirement C Creating and Maintaining Sound GovernancePart 1 - The Nine Required Elements of Good GovernancePart 2 - Recommended Best Practices, Sample Documents & Regulatory Reference Materials

What are the duties of board members?

• Defined by case law, the duties of board members are the legal

standards against which all actions taken (or not taken) are measured

• They are collective duties and mandate active participation by all

board members

• Accountability is demonstrated by exercising the:

–Duty of Care

–Duty of Loyalty

–Duty of Obedience

Duty of Care

• Requires that directors:

– Be reasonably informed about the organization’s activities

–Participate in decision-making of the board

– Act in good faith and with the care of an ordinarily prudent person in comparable circumstances

• In other words, they must pay attention to the organization’s activities and operations

Duty of Loyalty


–Exercise their power in the interest of the organization

–Not exercise their power in the interest of another entity, particularly one with which they have a formal relationship

• In other words, when acting on behalf of the organization, board members are expected to place the interests of the organization before any other personal or professional interests

Duty of Obedience


–Comply with applicable federal, state, and local laws

–Adhere to the organization’s governing documents

–Remain guardians of the organization’s mission

• In other words, they must make sure that they personally, and the organization they govern, follow the rules.

UWW Membership Requirement C

What the Requirement C Guidance is . . .

It is:

intended to be a tool that helps to ensure universal, effective governance to protect the United Way brand.

intended that the standards would provide each member with a clear picture of an organization that is well governed.

an attempt to strike an appropriate balance between requirements and recommendations to achieve national consistency and local autonomy.

. . . and what it is not

It is not:

intended to be an operational manual which directs day-to-day management of a local United Way.

intended to confer upon the national organization the authority to remove a member from the United Way system based solely upon a few variations from the standards.

Implementation Standards for Membership Requirement C

• Nine Required Elements of Good Governance

• Complemented by Appendices loaded with samples to accelerate and facilitate implementation

• Guidance is specific to United Ways but will ring true for any nonprofit

• Effective January 1, 2011, with full implementation over the next 12-24 months

Nine Required Elements of Good Governance

1. Defined Responsibilities

2. Board Training

3. Annual Report

4. Conflict of Interest Policy

5. Governance Documents

6. Meeting Procedures

7. Meeting Minutes

8. Compensation, Benefits and Business Expense Policies

9. Review of Audit & IRS Form 990

1. Defined Responsibilities

The Bylaws of the organization will establish defined responsibilities in the following areas to be exercised by the Board, a committee, or some subset of the Board:

– Executive

– Board Development

– Ethics

– Finance

– Audit

– Executive Compensation - Because United Ways must protect the shared brand from headline risks, including those related to unreasonable executive compensation levels, all Metro 1 United Ways must annually provide CEO compensation information to the UWW Membership Accountability Committee.

2. Board Training

Board training provides knowledge and understanding to board members so they can effectively carry out their roles as members of the organization's board of directors.

• Selection of the particular training topics and training methods depend on the nature and needs of the organization.

• Appendices provide a sample training agenda and the table of contents for aBoard training manual

3. Annual Report

The annual report is the single most important publication an organization can use to educate the public on how it fulfills its mission.

Recommended annual report components based on BBB/Wise Giving Alliance standards

• Mission statement

• Board of Directors

• Program service accomplishments

• Financial information

4. Conflict of Interest Policy & Procedure

Conflicts arise when personal interests of a board member, volunteer or employee are potentially at odds with the best interests of the United Way.

The Board shall establish a conflict of interest policy that at a minimum addresses

• How to resolve real or perceived conflicts

• Annual and ongoing disclosure practices

4. Conflict of Interest Policy & Procedure (continued)

Additional steps may include:

• Limitations on business transactions with board members and employees

• Disclosures required (potential, perceived and real conflicts)

• Recusal from decisions involving potential conflicts

• Procedures to ensure fairness with business activity (e.g., competitive bidding process)

Appendix includes sample policies.

5. Review Governance Documents

In order to exercise due diligence with regard to organizational governance:

• Review governance documents at least once every three years

• Conduct an annual meeting of its members in accordance with the bylaws

• Distribute a copy of the current United Way bylaws to each director

• Make available to the public a copy of the corporation’s Articles of Incorporation and Bylaws.

6. Meeting Procedures

An active and engaged Board will ensure that:

• The United Way maintains strong governance practices and embraces accountability

• At a minimum, United Way Boards must meet once every quarter

• The Annual Meeting, if required under your bylaws, is not a substitute for a quarterly board meeting

• Guidance for electronic polling ofboard members

7. Meeting Minutes

Written meeting minutes are needed for all meetings that meet the following criteria:

• Conducted under authority of the organization’s governing board

• Meetings that obligate the organization or recommend action to the governing board

8. Compensation, Benefits and Expense Policy

• Create and adhere to a well-designed and fully documented executive compensation program that will attract and retain qualified employees at all levels of responsibility who perform in a manner that permits the organization to achieve its objectives mission and goals.

• Comply with all governing documents, Local, State, and Federal Laws and regulations.

• Board members’ responsibility and the “rebuttable presumption of reasonableness.”

9. Review Audit and IRS Form 990

To ensure the highest level of accountability and transparency:

• Both the annual audited financial statements and the IRS Form 990 provided to the Board

• Copies of both documents available for public review on the organization’s website

United Way Business Model

Measured by :

Lives improved

Individuals engaged: giving, advocating, volunteering

Investor satisfaction and confidence

Long-term, sustained financial growth

Resources under management

Big Ideas :

Build impact strategies in education, income, and health that improve lives

Frame strategies as investment products

Segment and understand your markets

Connect investor aspirations with need/opportunity

Values :

Outward facing, engaged with the community, committed to community success

Accountability/ transparency

Operational Excellence

Customer-centered

Inclusiveness

Innovation/continuous improvement

Final Thoughts on Governance

• Effective boards focus on strategy to accomplish the

organization’s mission to advance the common good.

• Governance is not management. See Governance is

Governance: http://www.independentsector.org/PDFs/governance.pdf

• Nine Required Elements are the

minimum for sound governance.

• Communicate to the community

about your organization’s

practices and policies.

System Citizenship and Collaboration

Network Citizenship

The National Landscape

United Ways by Metro Size – January 2011

8475

118

165

74

127

276

164

88

47

29

0

50

100

150

200

250

300

1 2 3 4 5 6 7 8 9 10 11

# o

f U

Ws

Metro size (Campaign in $)

Metro 1: 9,000.000+ Metro 5: 750,000-1,000,000 Metro 9: 50,000-100,000Metro 2: 4,000,000-9,000,000 Metro 6: 500,000-750,000 Metro 10: 50,000-25,000Metro 3: 2,000,000-4,000,00 Metro 7: 200,000-500,000 Metro 11: $25,000 or lessMetro 4: 1,000,000-2,000,000 Metro 8: 100,000-200,000


AL-1

AR-2

CA-3

CT-7

GA-2

IA-1

IL-50 IN-2

KS-4 KY-1

LA-1

MA-1

MI-3

MN-1

MO-2

MS-1

NC-2

NH-4

NJ-2

NY-5

OH-9

OK-1

OR-1

PA-3

SC-1

SD-1

TN-1

TX-7

UT-1

VT-1WA-2

WI-4

WV-3CO-1 VA-3

AR-4

ND-1

ID-1

NM-1

United Ways that have left the Network – State by State


UWW Members leaving the Network from January 2004 to January 2011

6 Members Resigned Voluntarily

(3% of total)

110 members Merged with another

UW64% of total

47 Members were revoked by UWW

(27% of total)

13 Members Shut Down Operations

(6% of total)

Most everyone agrees that…

1,243 separate “back offices” is too many

Our network needs some consolidation

There is opportunity for greater economy and efficiency

Companies and individual donors don’t understand zip code boundaries

The general public should see United Way as a cohesive network

But unfortunately…

No one wants to be the one who gives up their “control”

Many think consolidation is code for “hostile takeover”

Many think efficiency is code for “someone loosing their job”

Companies and individual donors want to work with their “local” United Way

The community too often can’t see the “united” in United Way

Few want to share their information

So how do we establish a new paradigm?

1. Acknowledge that the environment has changed

2. Be mindful of Mission but focus on the Value Proposition

3. Build a Business Model that delivers Value

VALUE

Advancing the Common Good/EIH

United Way as a Mobilizing Force

Driving Revenue and Resources

Why We Exist and the Value We Add

Mission

To improve lives by mobilizing the caring power of communities around the world to advance the common good.

Value Proposition

We galvanize and connect a diverse set of individuals and institutions, and mobilize resources, to create long-term change.

Network Citizenship’s Role

• If we wish to be successful “galvanizers” and “connectors”, we need to model that behavior

• Too often, our focus is on what is good for us when it should be focused on what is good for all

• We can’t expect our community partners to explore possibilities if we don’t explore them ourselves.

Network Citizenship: Webster’s New World Dictionary Definition

Network:• A system of interlacing lines, tracks, or channels

System: • A set or arrangement of things so related as to

form a whole

• As set of facts, rules, etc. arranged to show a plan

• A method or plan

• An established, orderly way of doing something

• The body, or a number of bodily organs, functioning as a unit

Citizen: • A member of a state or nation (or group) who owes allegiance to it by birth or

naturalization (or membership) and is entitled to full civil rights

Network Citizenship, from the legal perspective…

The United Way Worldwide Bylaws establish the concept of

Network Citizenship when it states:

“Members shall refrain from taking any actions or conducting

activities likely to damage the welfare, interests, or reputations of

the United Way system.”

Network Citizenship, from the business perspective…

We need to cooperate with one another in order to maintain:

• The public trust

• The United Way Reputation & Brand value

• The growth of resources available to our system

Network Citizenship, from the practical perspective…

“Your United Way’s relationships with other United Ways, state associations and USA national

UW acknowledge that each member bears responsibilities toward others. The successes

and failures of any one member impact the entire network. Your United Way fosters a high level of trust, information exchange and mutual help with others in the network to further our community

impact mission, create a consistent brand experience, and support a strong network of

United Ways locally, regionally, and nationally.”

The USA United Way Standards of Excellence incorporate the concept of Network Citizenship in Standard 4.8 which states:

Network Citizenship in action

Collaboration with other United Ways on common issues

–Create opportunities for regional or statewide collaboration and resource-sharing on issues and initiatives that are relevant to multiple United Ways, including public policy and advocacy

Corporate Relationships

– In shared territories, consult and work with other United Ways when asking for corporate gifts and involvement

National Impact

–When compatible with identified local issues, implement initiatives that further United Way’s USA national impact agenda

Collaboration

“In the long history of mankind, those who learned to collaborate and improvise most effectively have

prevailed.”

- - Charles Darwin - -

Why Even Talk about Collaboration?

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The Environment Has Changed

EconomyMarketplace Social Conditions

• Global

• Information / technology

• Increased training / education required

• Overreliance on old economy business

• More nonprofits

• Competition

• Increasing diversity

• People attached to causes, not institutions

• More complex

• Current ‘solutions’ not working

• Basic building blocks of a good life still absent for many

Donors and others are asking us to do it…

“I have been a leadership donor for several decades… I’m concerned that inefficiencies in United Way are damaging the reputation”

“The lack of standardization among United Ways is not only costly, but results in avoidable inefficiencies”

“There is no reason to have separately incorporated United Ways in each county… UWW needs to insist that more consolidations occur so that

donor dollars are used more effectively”

“Our organization submits funding requests and various reports to 22 United Ways in our 18 county service area… we have a full time

person whose sole responsibility is to prepare these reports… even though United Ways fund only 3% or our budget.”

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Our response to this seems obvious…

We need to increase our collective understanding of the United Way network’s existing collaborative efforts

We need to stay innovative in our approach to efficient/effective operations in these tough economic times

We need to propel the United Way network forward through greater collaboration among its members so that it will become more effective in its execution of a shared mission

Our for-profit counterparts are doing this so our donors expect us to consider its benefits too

Create & deepen

relationships with

individuals &institutions

What will it take to become a mobilizing United Way?A deeper focus on certain elements of the Standards of Excellence

If we wish to be effective, we will need to:

Mobilization: Executing on the Business Model

Operate as an integrated

and aligned organization

Have the right skills, competencie

s & leadership

Measure, evaluate &

communicate results

Engage with the

community

Develop strategies and focus actions

Mobilize resources

Align and execute on plans and strategies

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UWW’s Perspective on Collaboration

• Collaboration gets to the heart of the Business Model, specifically contributing to:

Greater network capacity locally, regionally and worldwide

More effective network design to put greater resources against

mission and improve partner experience

Expanded base of donors, advocates, volunteers and

supporters

Continue to enhance and build reputation and trust

Greater Network Capacity

• Collaboration is less about “cutting costs” than it is about “effective deployment of resources”

– Costs may go up at first, the key is the return on investment

– Fewer generalists, more specialists

– Working yourself out of a job isn’t necessarily a bad thing

• How many times have you said, I would like to… but I just don’t have the time?

– Allows local volunteers to focus more on local mission delivery

– Allows staff to focus on new and traditional work

Effective Network Design

• If you were going to design a UW network, would it look like what we have today?

–Research suggests that we’ll be saying goodbye to our last donor in 2020 unless we change the way we approach our business

• The “community” is redefining itself constantly

–Network Design isn’t code for “let’s get rid of the small UWs”, its about acknowledging that we need to redefine our mission delivery network too

–Sometimes “bigger” isn’t better, but if we don’t have an honest discussion about it, how will we know for sure?

Expanded Base

• More donors:

– Reimagining the “Workforce” Campaign

– Segmentation

– Leveraging the Social Media

• More types of donors:

– ADT

– Major Gifts

– Planned Giving

• More types of revenue:

– Grants

– Bequests

– Services

Build Reputation and Trust

• Headline Risk – It is easier to maintain a good reputation than to rebuild a bad one

• Trust – One of our greatest assets

• Accountability – It is what we do when no one is watching that defines who we really are

• Transparency – The world is watching us, will they like what they see?

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• United Way Worldwide is supportive of all kinds of collaborative efforts

Monitoring activities nationwide & creating learning opportunities (Community Impact Leadership & Learning Team)

Engaging a consultant to develop models (McCormick Group)

Providing member consultation (Membership Accountability Team)

Supporting studies & tools (Financial Issues Committee)

Upic Collaborative

Indiana Association of UW’s NP&AS

The Bottom Line…

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• United Way Worldwide promotes collaborative efforts

UWW Staff Leader’s Conference

UWW Financial Management & Human Resources Forum

Mid-Winter Institute/Great Rivers Conference

The 10 “Must Haves” for Collaborations Webinar

Collaborations & Mergers Course

Intro to United Way Financial Operations & Accountability Course


The Bottom Line…

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• United Way Worldwide facilitates collaborative efforts

Kansas City Collaboration & Merger

Metro Chicago Merger

San Bernardino/Riverside United Ways “Friendly Association”

Truist (formerly United eWay Collaborative)

UW Knowldege Café (Case Histories and Tools)


The Bottom Line…

“Collaboration is allowing someone else to influence how your money is to be used.”

- - Brian Gallagher - -

The Collaborative Continuum

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The Collaborative Continuum

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Communication

SharedServices Joint Ventures

Shared Governance Merger

Initiatives

Memorandum of Understanding or Letter of Agreement

Contract Legal Filing

Instruments

SIMPLE

COMPLEX

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Communication

• All organizational collaborations begin with a conversation

• We need to learn about each other

• We need to determine common needs and wants

• First conversations should not have predictable expectations

• Trust is developed face-to-face - - not over telephones, through emails or memos

The Collaborative Continuum Types of Collaboration

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Shared Services

• Two or more organizations agree to jointly purchase or operate a service to be shared among the participants.

• Possibilities could include:

–Joint purchasing

–Using excess capacity in one entity to service others

–Joining forces to obtain a service that will be needed by all

–Other?


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Joint Ventures

• Two or more organizations agree to partner in the creation, development and/or operation of a service needed by all


–Creating a joint call center (211)

–Combining marketing resources

–Combining campaign staff

–Other?


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Shared Governance

• Two or more organizations create an entity to perform a service for all and share equally (or though some proportionality) its governance

• Almost always requires creating a new corporation


– A call center

– An entity for most purchasing

– An entity to operate and manage property used by all


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Merger

• Two or more organizations formally become one corporation

• Dissolution (versus merger) is not a good option

• Merger is the ultimate collaboration

• Merger is the ultimate shared governance


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Memorandum of Understanding (MOU)/Letter of Agreement (LOA)

• Falls short of a contract but contains some of the same elements

• Should not be used where significant funds are involved

• If trust is a problem, it’s a good place to start

• Strength = easy to negotiate and requires little time (relatively)

• Weakness = easy to walk away, usually without penalty

The Collaborative Continuum Types of Instruments

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Contracts

• Formalizes collaborative initiatives far more than MOU/LOAs

• Strengths:

–Defines the length and cost of the agreement

–Can be used where big money is involved

–Not as easy to exit

• Weaknesses:

–More time needed for negotiation

– Involves lawyers (costly)


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Legal Filings

• Needed for most forms of shared governance and all mergers

• Strengths:

– Usually permanent - - must work things out

– Generally reduces financial risk

• Weaknesses:

– Complexity – longer time to negotiate, more people involved

– Involves lawyers and CPAs (can be very costly)


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Top 10 Essentials for Collaboration

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#1 - Establishing “Trust”

• What ever the reason, if the parties don’t develop trust, you will never get out of the starting block.

• If you don’t maintain trust, it will quickly fall apart

#2 - Be Persistent

• There is no way around it, these things simply take time

• Just because they said “no”, is no reason to give up

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#3 - Identify a “Champion”

• Someone involved in the collaboration must be sufficiently committed to seeing the process through to a successful completion to best guarantee that the project maintains its momentum.

#4 - Operational Imperative

• Internal or external conditions change to a degree that all partners agree that “we have to do something different.”

• The imperative creates a sense of urgency that keeps the momentum of the project moving

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#5 - Responsible Governing Body

• At the outset of the collaboration, parties should develop a governing body that will guide the work of the collaboration and define its role relative to the local United Way’s board of directors

#6 - Governance Policies

• Written governance policies provide structure and continuity.

• Provides parameters for group interaction, dynamics, and norms.

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#7 - Mission Alignment

• Collaborations are not successful if organizations are moving in different directions, leaders disagree on objectives, or philosophies differ significantly.

#8 - Right Players at the Table

• People with the “know how” and passion

• People who are respected and willing to trust

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#9 - Financial Commitment

• Each partner involved in the collaboration is committed to investing in the partnership according to their ability

• Financial benefits of the collaboration are also shared…and agreed upon in advance

#10 – Commonalities

• Similar community demographics & needs

• Similar directives from the community or the boards

• Similar goals

Something New… The Collaboration Toolkit

DRAFT (3/17/11)A United Way Guide to

Collaborations and Good Relationships

Focused on Shared Service CollaborativesInformation Technology

• To properly assess whether an organization is a candidate for collaboration of information technology (IT) services it’s important to understand its key information technology platforms and processes.

– Hardware

– Software

– IT Services

• The primary benefits of collaboration fall into four categories:

– Gain efficiency/productivity—management focus

– Save money

– Reduce Risk-Increase security or control

– Access to IT expertise/technology

Focused on Shared Service CollaborativesFinancial Services

• Deciding whether or not to enter a collaborative arrangement for financial services requires a better understanding of several factors:

– Financial service overview

– Key financial processes

– Benefits of collaborative financial services

– Potential partners to consider

– Service level Agreements

Trust is the essential ingredient for a successful collaboration.

• The amount of trust between the partners will determine where the collaboration falls on the continuum of collaborative efforts.

• As trust grows, it is likely that the partners’ willingness to let each other “see behind the curtain” will grow and that leads to bigger and bigger “leaps of faith”.

• For example:

– In the beginning, a collaborative effort may start with a simple data entry agreement.

–As time goes on and a working relationship develops where expectations are met, the partners might decide to move to a closer relationship where they are likely to be less concerned about loss of control and the confidentiality of their information.

800 Pound Gorilla #1: We’ll loose our identity…

• Affirm often that local identity is as important as centralized administration

• Use a central board for governance

• Use local advisory committees

• Keep the offices open until it seems “obvious” that a better location exists

• Ask yourself often if keeping a particular “community” structure operating is only perpetuating an artificial differentiation

• Integrate support for local with support for region

• Use collaboration as an opportunity to propel change in other areas

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800 Pound Gorilla #2: I’ll loose my job…

• Use of the skills inventory will help to match up existing staff with new positions

• A bookkeeper may turn out to be a great grant writer

• A small office Executive Director may turn out to be a great Planned Giving Officer

• Naturally you can only have one of some jobs but there are other opportunities in the UW system for good people who can see beyond what is, to what can be

• Some people will leave because they aren’t ready for the change and some others will leave for reasons all their own… and that’s OK

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Deciding if collaboration is for you..

Key Decision/Action Point #1

Determine if your local United Way is a candidate for collaboration, ask your self questions such as:

• Do you have high turnover in the area/department for which you are considering the collaboration?

• Will this collaboration strengthen your internal control environment?

• Will the collaboration increase capacity?

• Do you have difficulty maintaining current best practices in this area?

• if “yes”…


Determine if a specific type of collaboration is appropriate for you, ask yourself questions such as:

• Will the collaboration reduce risk?

• Is or should the service be a core competency of your United Way?

• Is your Board of Directors comfortable yielding to or sharing control of this operation with an external party?

• Once you identify a “yes”…


Develop a business case for collaboration

• Assess the key business objectives you are is trying to achieve

• Determination of what is within the scope of the collaboration and what is out of scope

• Spell out a timeline of events that are expected to ensue and

• Do a financial analysis

• if your Board finds it compelling, then…


Begin to negotiate a collaborative agreement with questions such as the following in mind:

• Will the collaboration result in a higher level of quality, expertise and/or service?

• Will the collaboration increase capacity?

• Will the collaboration result in a more seamless service delivery?

• Will the service delivery be more donor-centric?

• Will the collaboration increase flexibility to adapt to changing circumstances?

Questions?

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Thank you!!!

Ken Euwema, Vice President - Membership Accountability United Way Worldwide (Alexandria, Virginia)

[email protected]

Risk Management through Organizational Governance, Network Citizenship, and Collaboration

Documents

Transcript of Risk Management through Organizational Governance, Network Citizenship, and Collaboration