The Blessed Use of Tainted Money

by Hank Goldstein of member firm The Oram Group

Nonprofits have long struggled with the provenance of money. Gifts flowing to environmental groups can be especially fraught. Do you take money from a polluter? Or do you renounce him for his evil ways? And do you keep raising money from your base either way? For some groups there is no choice but to reject “tainted” money. But others – including the biggest names in tree-hugging – National Audubon, Environmental Defense Fund, and now it comes to light, Sierra Club have taken the King’s shilling and in essence, many would argue, become the King’s man.

During the time he headed Sierra Club, Carl Pope, one of the best known environmentalists in the country took $26 million from oil, gas and energy interests and told no one. “Runners shouldn’t smoke, priests shouldn’t touch the kids, and environmentalists should never take money from polluters,” John Passacantando, a former director of Greenpeace who is now an environmental consultant, said in an interview with The New York Times (published February 14th).

But the other view is perhaps best expressed by the old Southern preacher who when confronted for taking tainted money to fix the church roof replied: “tainted money? T’aint enough!” The failure to disclose is Mr. Pope’s real sin. It’s an embarrassment to Sierra Club’s board (who supposedly didn’t know) and to the new CEO who came on in 2010 and took two years to ‘fess up. It may Sierra a few donors; about that I’m not so convinced. Sierra is pretty much in the center for environmental stuff. Greenpeace is an outlier on one end and other (not to be named here) groups are little more than PR blankets for the dark side.

This sad episode once again demonstrates the fragile relationship between a nonprofit board and management: the board is utterly reliant on management to provide information – not only on operations but especially on policy as well. I love jumping on boards because so many trustees have mastered the art of sleeping standing up with their eyes open. But not in this case – unless it turns out that any of Sierra’s board did know but covered up. No one has said that yet as far as I know. I’ll stay tuned. As should we all.

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The Trustee’s Role in Fundraising: Four questions every nonprofit board member should ask

by Ted Grossnickle and Angela White of member firm Johnson, Grossnickle and Associates

At JGA, our experience as advancement officers at private colleges and Ted’s role as a campaign co-chairman and trustee for his alma mater gives us a unique position as we advise our clients on introducing a campaign to their trustees.

We have a perspective as a staff member, a trustee and a volunteer in addition to that of a consultant.

It’s not that they are mutually exclusive. They’re not. But they are different.

Certainly you want a consultant to be objective- even dispassionately so. However, you want your staff,  trustees and chairs to be passionate about the cause.

Both perspectives are required for success in a campaign. It is the blend of those two ways of looking at strategy that allow us to help a college avoid common pitfalls and face the hard questions that must be asked in these challenging economic times.

Where Boards Go Wrong – Neglecting to Ask the Hard Questions

How many times have you heard someone say in a board meeting: “Well, you know our role is to give, get or get off?”

It is said so often and has been around so long that for many it appears to capture a magical essence of the role of the board member in fundraising.

But it doesn’t even come close and sometimes it leads to the worst mistakes a board can collectively make.

When the board is so focused on blindly raising funds, the collective mental calculus sometimes goes like this. We want to build a new addition, or add a new service. That costs money. We don’t have that money right now. Let’s go ask people for it.  Fred and Susan, you go talk to John. Angela and Bill, you go talk to Rob. We’ll just go and get it done. Period.

What very often results is that the group ends up raising some money. You get one or two persons who are enthusiastic to make some nice gifts but others don’t contribute, the project is partly started and not completed—- and drags on and on.

Boards so often neglect to take the most important step — which is to talk about why the proposed project means so much, how it connects to and helps accomplish the organizations’ strategic plan, and why donors might wish to make gifts. Even more importantly, they do not discuss if they- as members of the board- are EACH willing to make a gift to the effort.

Failure to Take Ownership – Dangers of the Unanimous Approval Syndrome

All of us have likely sat in a board meeting and heard a staff or board member present a plan for a campaign that on the surface appears well thought out, supports the organization’s strategic plan, fills an important need, is likely to engender nice gifts  —  all seems well.

During discussion of the plan, there are comments like: “yes, this sounds good,” and “sure, we think that is a great way to go,” or even “absolutely, go after it!” There are just a few mechanical or tactical questions. The vote is called for, the plan is approved and the board goes on to new business.

Seems great, but our experience tells us that is when you should be very concerned. That might be called the Unanimous Approval Syndrome.

When this happens, it is likely that the board members do not feel as though they are the “owners” of the Campaign. They have said it is ok to proceed assuming that others will make the gifts and do the hard work associated with making it succeed.

They have not asked probing questions and the topic of what is required of them has never come up. They have not considered what it will mean in terms of a personal gift from them and their ownership to go out and present the plan passionately to others to secure their support.  Board members must carefully consider and discuss what it means to be owners of the effort.

Avoiding the Pitfalls – Four Questions Every Board Should Ask

With these common pitfalls in mind, Ted recently shared in a short video interview for our website what we believe are key questions a trustee should ask when they hear about a proposed campaign:

  1. Do you understand why a campaign is proposed and will it advance the mission of the organization? Will it help you help people? Will you do better work?
  2. Have the staff and the CEO thought through the campaign… thoroughly? Do they know what will be required of them? Can they support the effort? Are they ready to support volunteers?
  3. Are you prepared to be personally very generous to the campaign.
  4. Has an objective set of eyes studied the campaign – and reported authentically on what will make it work— and what might derail it?

We’d be interested in hearing your perspectives about these key questions. Please let us know what you think. We’re all students when it comes to getting it right for our clients…

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Some intriguing reading from north of the border: The Globe and Mail series on Giving

By Marnie Spears of member firm KCI (Ketchum Canada Inc.)

North of the 49th parallel, virtually everyone involved in the charitable sector has been closely following the extensive series on philanthropy that the Globe and Mail, Canada’s leading national newspaper, has produced this Fall.  (www.theglobeandmail.com/giving)

In recent years we have become accustomed to seeing media coverage of the charitable sector often falling into two opposing categories:  feel-good, although sometimes superficial, profiles of a local charitable program on one hand; or pieces that are intended to be an exposé of sorts related to administrative costs – often based on analysis that misses the mark – on the other.  With this back drop, I have found the Globe series to be a breath of fresh air.  Thoughtful and balanced, the wide-range of topics presented includes many perspectives that will be equally of interest to our Giving Institute colleagues in the US…a few examples:

  • ‘Welcome to the next generation of philanthropy’

www.theglobeandmail.com/life/giving/giving-news/welcome-to-the-next-generation-of-philanthropy/article2218223/

  • ‘It’s time to say not to not-for-profit’

www.theglobeandmail.com/life/giving/giving-commentary/its-time-to-say-not-to-not-for-profit/article2217493/

  • ‘New breed of company blurs lines between charity and business’

www.theglobeandmail.com/life/giving/giving-news/new-breed-of-company-blurs-lines-between-charity-and-business/article2224803/

  •  ‘Accounting for the new philanthropy’

www.theglobeandmail.com/life/giving/giving-commentary/accounting-for-the-new-philanthropy/article2224629/

  • ‘New social impact bond targets the greater good’

www.theglobeandmail.com/life/giving/giving-news/new-social-impact-bond-targets-the-greater-good/article2219211/

While not sugar-coating the challenges facing a sector that is being asked to do more with less and with deepened scrutiny, the series very effectively examines these topics in a forward-looking and solution-focused way.  For all of us at KCI, most importantly it reinforces an essential theme that has been a drumbeat in our work with clients for years: the need to deepen and widen the ‘culture of philanthropy,’ both inside individual organizations and in Canada as a whole.  With the number of Canadians giving dropping and their average age increasing, it is indeed an unprecedented challenge…but also an unprecedented opportunity.  And it is up to all of us working in the sector to innovate, take risks, deepen our impact and communicate that impact in order to make the most of this opportunity.

I hope you enjoy flipping through some of the articles in this series, and find some ‘nuggets’ of interest that are relevant to your work with clients.  Happy reading, and happy holidays to all!

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Where is the Money??

by Rita J. Galowich of member firm Fund Inc.

Are nonprofits leaving money on the table?

Are they/how are they leveraging their programs and services to gain the maximum dollars while making a positive impact on society?

The “new normal” in fundraising is demanding that development professionals think out of the box. We cannot afford to do what we have been doing in the same manner. We need to experiment and test new fundraising concepts and strategies to generate revenue to support the mission of our organizations.

Organizations must take their programs/services to the sources that would be most interested in supporting them. These could be individuals, corporations or foundations. The key question is how to leverage an organization’s programs with the right funding source to meet what is growing to be a significant part of the “new normal”: social capital investment. I believe the word investment is critical. It goes well beyond making a contribution for the purpose of doing something good and feeling good about the gift. It means that the money is impacting society in a very positive manner and being well managed by a competent and well run organization. The impact of an investment on positive social change is part of today’s investor equation. Does an organization have the ability to utilize its programs and services to create positive change in a community if it partners with the right investor? I believe it does.

Relying solely on existing donor relationships is leaving dollars on the table. Seeking opportunities for larger and more impactful investments must be a part of our fundraising strategy. Only then will we be helping to create positive change in our communities – a win-win for both the nonprofit and the investor.

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by Thomas W. Mesaros of member firm The Alford Group

Like many not-for-profit organizations these days, you are probably asking the following questions: Will the economy ever recover?  How soon might we begin the initiatives to fulfill our strategic plan?  Is this the time to begin, or should we wait until we are sure the time is right?  These are good questions and the answers may seem elusive.

Since World War II there have been 17 economic recessions and 17 recoveries.  We are currently in the 17th recovery but for many, especially the unemployed and the underemployed, it feels like this recession is continuing and recovery will never get here.  Many economic “prophets” or prognosticators have predicted a double dip (especially over the past summer months) but those fears seem to be easing.  From the end of 2008 and into 2010 we experienced the worst recession since the Great Depression.  Let’s not forgot that this is not normal.  It has been tremendously difficult and it will take time to recovery properly.

But signs of recovery are appearing.  Is this the time to make your move on a new initiative?  Here are some key facts to consider:

  • Currently there is $2.7 trillion sitting in money market funds earning about .25% annually.  (That is a lot of money earning nothing).  This does not count checking accounts, traditional saving accounts or short term certificates of deposits.  There is plenty of money out there.
  • The savings rate in America has been running just under 5% for the last 10 quarters.  People are saving rather than spending – which is one reason the economy is only slowly recovering.
  • Credit card debt is going lower every month rather than increasing, as it was before the recession.
  • During March 2009 the DJIA hit a low of 6,500.  Today (October 26) the DJIA closed at 11,869.  That is a percentage gain of 82% over 31 months.  Many people have made a lot of money during that 31 month period.
  • The unemployment rate nationally is around 9%.  Some states are better than this and some states are worse than this.  For individuals with a college education the unemployment rate is only 4% – a significant difference.
  • Corporate profits continue to be up as companies run “lean and mean” rather than increase employment.
  • If the European Union can resolve its debt issues, especially around Greece, the stock market will grow even more rapidly.

As not-for-profits ponder these facts, we are advising them to do the following:

  • Think long term and be nimble short term.  This is the time to do significant planning to better meet the community needs your mission calls you to address.
  • Focus on community need, not your organizational needs; donors will respond to those who are improving the lives of people.
  • Be bold in your approach.  During recessionary periods community needs increase, and the response should mirror that increase.
  • The economy will recover and those organizations that have a clear vision and direction will attract the attention of their community leadership during that recovery.  Develop that clarity and begin to move forward.
  • Board and senior staff need to act in unison.  The not-for-profit dynamic has a duel leadership aspect.  Organizations with strong staff and strong boards, where each understand their respective roles, flourish.  Be sure there is unity of purpose and vision before you embark on any new initiative or campaign.  If there is, you have a much greater chance for success.

These are difficult times, but it is time to move ahead.  Get in front of the pack and move forward now!

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Taking a Fresh Look at Endowment: Financial Security, Ethical Dilemmas, & Investment Strategies

by Robert I. Evans of member firm The EHL Consulting Group, Inc.

Every vibrant nonprofit today requires a strong endowment as part of its financial program and the best and most well-run agencies accepted this mandate many years ago. Lessons from the Great Recession remind us, too, that endowments are a critical venue for institutional funding. Yet fresh perspectives about endowments are important today and are reshaping the financial picture for many nonprofits.

Webster’s defines an endowment as “the part of an institution’s income derived from donations.” With this basic statement in hand, I am hearing that some nonprofit organizations still confuse “endowment” with “planned giving” or a “freespending account” . . . or even other incorrect or misleading terms. This prompts me to wonder aloud if nonprofit leaders truly understand the critical importance of having adequate endowments, what they are doing to build this important income stream for the long term, and what they see as their responsibilities to protect the corpus of the endowments.

Nonprofit volunteers and professional leaders need to keep evaluating the endowment programs that they create and depend upon. Recognize that donors have made endowment gifts with the expectation that funds will be managed well (conservatively), and funneled to oftentimes specific channels for restricted purposes and will be available for years to come. Every endowment giftrepresents an investment in the future of a nonprofit.

As a consultant to nonprofits of all types and sizes for many decades, I receive questions constantly about what represents adequate endowments and what these dollars can be used for. Best practices today dictate that a nonprofit’s endowments should exceed no less than five times its operating budget. One of the troubling factors today is that too many nonprofits are not considering this ratio, are looking only at their day-to-day needs, and are not necessarily being creative in the approaches they are taking in establishing and encouraging endowment gifts.

Because of financial pressures, some nonprofit leaders have even dipped into their organization’s endowment when times seem economically dire and have not replenished the corpus, thereby perpetuating “the slippery slope” of economic difficulties. This is not only bad practice but it also often violates instructions set forth by generous donors.

There are many reasons to keep healthy balances in the endowment investment portfolio. One of the primary reasons is because of a likely scenario that I discussed for “Taking the Long View” in the September edition of Advancing Philanthropy. The author, Paul Lagasse, asked me if there was a lesson to be learned about the Great Recession as it pertains to endowment funds. My view steadfastly remains that we need to be prepared for the next downturn in the economy. The best way to do that responsibly is safeguarding our endowments. Interpret this as protecting the corpus of the endowment while concurrently attracting more donor support for restricted and unrestricted purposes.

In the winter 2010 issue of The Stanford Innovation Review, authors Burton A. Weisbrod and Evelyn D. Asch make another compelling case that endowments are more than simply a rainy day account. In many cases, it is a benchmark for bragging and a measurability of viability. It is a way for consumers (aka donors) to understand the impact of an organization. Savvy donors use it as a guide to determine an organization’s level of sophistication as well as their wealth management expertise. From an organizational perspective, it is a way to showcase a respectable endowment as “qualified” and capable for cultivating additional support.

Besides the ethical dilemmas associated with dipping into the assets of an endowment, acknowledge, too, the overarching federal law that prohibits such practices from occurring. The Uniform Prudent Management of Institutional Funds Act of 2010 (UPMIFA) provides guidance on investment decisions and endowment expenditures for nonprofit organizations. Almost every US state except Florida, Mississippi and Pennsylvania also adopted these recommendations about good investment behaviors. The idea of this act is to responsibly dictate guidelines for nonprofits on what levels of withdrawls from endowments are permitted. In other words, endowment funds decreasing in value probably are not eligible for withdrawls. Any deviation from these guidelines would be deemed irresponsible and possibly unlawful.

Therefore, as increasing numbers of nonprofits do adopt best practices about establishing and fostering endowment programs, I recommend that organizations consider four essential points to secure both the trust of donors and treat their funds with respect:

A. Continually review investment policies. In doing this, I recommend that every nonprofit Board regularly assess investment allocations, evaluate the work of management and investment services, and clarify and redefine endowment objectives. Professionals who are specialists in nonprofit investment strategies should be called upon.

B. Endowment programs should be building for 20 or more years . . . not just for today! Contributions to endowments should not be looked at as band-aids on the finances of any nonprofit. Therefore, donors may make either (or both) testamentary gifts as well as current gifts to fund restricted or unrestricted purposes.

C. Provide an annual report to stakeholders. This important document can highlight accomplishments and relatable statistics to give donors a sense of how their gifts are being appropriated and managed. Perhaps their money is supporting a specific program or professional position: donors expect to see if their dollars are justified by the end result. In the case of unrestricted gifts, donors would like to know that their contributions are paving the way for a financially sustainable future for the organization they love.

D. Seek ongoing endowment initiatives. Make sure there is a vision for what endowment gifts can support. Donors like to see tangible results being accomplished. They may also like to have some control of where their money is going. Invite donors at all levels to truly become investors in the future of the nonprofit by being committed to endowment strength just as much as addressing every day financial needs.

Robert Evans is the founder and managing director of The EHL Consulting Group, of suburban Philadelphia. EHL Consulting has been a longtime member of the Giving Institute. Mr. Evans is widely cited in publications across the globe.

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Leadership makes a Difference and Effective Leadership is a Covenant

by Leonard J. Moisan, PhD of member firm The Covenant Group

CEOs and Board members frequently ask us what it takes to be successful at advancing an organization’s mission or maximizing capacity through fundraising. Is it the compelling vision, the social media efforts, the brilliant plan and strategies, the accomplished solicitor or the compelling video? I’ve heard people suggest that fundraising success depends on the economy, the type of organization or the people who are served.

Certainly all of these things influence success in fundraising and mission advancement, but when I thought about the subject for my turn at the blog, I found myself dwelling on one variable. Based on our experience we have found that leadership has the greatest influence on success or failure. That’s true for both fundraising and mission advancement. It may sound trite, but the more clients we serve the more we find that their success or failure depends on leadership. But what kind of leadership is it, and what does that term really mean? 

At any upscale bookstore these days, it’s fairly easy to find a wide variety of well-marketed, attractively packaged books on leadership—leadership laws, leadership habits, leadership secrets and more.  In one store alone, I counted more than twenty different titles with the word “Leadership” in them and dozens more on subjects related to leadership.

With so much literature available on the topic, one might assume that we have a pretty good grasp on the essence of leadership.  But, even a cursory view of the nightly news demonstrates that in reality, quite the opposite is true. Almost daily we are confronted with stories of people entrusted as “leaders,” who violate that trust with breaches of integrity. A business fails because of illegal accounting practices … a CEO is implicated…a senator cheats…a spiritual advisor breaks his wedding vows…a nonprofit executive is indicted…they are all haunting reminders of people who were entrusted as leaders but failed. Why is it that we see record numbers of books about leadership on our shelves at the same time we see record numbers of leaders failing on our television screens? Is this type of inconsistency truly that pervasive, or is there another explanation?

I believe that we hear and read so much about leadership because we are in the midst of a leadership crisis.  This crisis is not limited to business or political realms.  It is evident in our homes, our colleges, our communities and even our places of worship.  Simply stated, people are deeply interested in leadership because they long for it but rarely see it. And when they do experience leadership at its best, it inspires them to follow. Clearly that’s what we have seen in the best nonprofit organizations both from board members and executives alike. Unfortunately we have also found that leadership isn’t so common, and because it is lacking it puts some very worthy organizations in great peril.

Well, if leadership is really that rare, then what do we call the many organizational heads we normally refer to as leaders? Some, like James MacGregor Burns, call them power wielders.  Others, such as the late Peter Drucker, refer to them as managers and in some cases even misleaders.  The point is that, whatever we call them; there is a big difference between being the head of an organization and being a leader.

Ultimately, real leaders are known not only by what they accomplish, but also by how they accomplish it and how they influence people in the process. Our community in Louisville recently lost one of these leaders, who passed away unexpectedly. Owsley Brown was the kind of leader who could get people to the table and help solve pressing problems. This former Board chair of Brown-Forman Corporation used his resources unselfishly to improve the quality of life for a great number of Louisvillians. I had the privilege of working with Owsley on several projects and his humility and benevolence enabled him to lead in ways that engaged people and advanced the missions of many nonprofits. Owsley led well because he related well with people and he served with a generous spirit. He certainly didn’t have to do all that he did, but he got involved to make Louisville a better place to live for everyone because he cared. And because he cared, he also had credibility as a leader. That really is the point.

In reality, leadership is far more about relationships, influence and methods than it is about achievements. For example, the very best board and executive leaders with whom we have worked, lead by example in just about everything they do. As a result of their leadership, they have built credibility that also builds capital for the nonprofits they serve. This is also true of nonprofit CEOs and Board members alike. However, the unfortunate mistake many nonprofits make in selecting people to serve on their board is that they concentrate solely on “achievement” and the power that accompanies it, sometimes at the expense of character. Not that achievement and character are mutually exclusive, but in assessing the potential of a leader it is important to consider both dimensions

Certainly, achievement is a by-product of leadership, but a resume is a poor tool to use if you want to capture the true essence of leadership.  It simply cannot be found in the results of a performance contract, increases in profit margins or growth in share price. Rather, leadership resides in the dynamics of relationships between leaders and followers.  It is found when leaders and followers relate to each other in ways that go beyond basic contractual obligations. No doubt, contracts help facilitate achievement by defining the legal parameters, performance expectations and working conditions of a given relationship. But contracts cannot motivate or inspire followers, nor can they facilitate their growth. Those are the responsibilities of a leader, responsibilities that extend well beyond the basic requirements of a contract.

In just about any field imaginable relationships are the key to success.  The best teachers forge strong relationships with their students; the best singers and actors connect emotionally with their audiences; the best coaches bond with their players; the best fund development people relate well with their donors and the best leaders identify with and engage their followers. More than one expert has pointed out that during the Kennedy-Nixon debates, John F. Kennedy may have actually lost the debates on substance.  Yet, President Kennedy was an overwhelming success and actually went on to win the election because he was able to connect with the American people.  This president certainly was not without his flaws, and history has revealed that his tenure in the White House clearly had its problems.  But as a leader, President Kennedy identified with his followers, and they identified with him and, as a result, they were willing to follow him.

Like President Kennedy, effective leaders are able to connect with and engage followers emotionally in relationships through which they pursue common purposes and achieve common goals that are larger than those of any one individual.  In so doing, leaders are also able to provide meaning and hope for the people they serve in ways that create high levels of synergy, productivity and fulfillment.

When he came to America from France in the 1830s to observe our unique form of Democracy, social philosopher Alexis de Tocqueville observed that, “A similar covenant exists in fact between all citizens of a democracy; they feel themselves subject to the same weaknesses and the same dangers; and their interests, as well as their sympathy, makes it a rule with them to lend each other mutual assistance when required.”

At its core then, leadership is a relationship in which leaders and those being led are connected and emotionally engaged in pursuit of common purposes.  It is much more complex than a simple contract.  Instead, leadership is a covenant between leaders, the people being led and the organizations they serve. That kind of a relationship binds them together in a common quest, demands their “mutual assistance” and enables them to achieve far more than they ever would on their own. When nonprofits are fortunate to be advanced by this kind of a leader, they are usually able to achieve high levels of success.  

So why does all this matter or, more to the point, why study leadership?  The simple answer is to help us get better at it and thereby help our organizations prosper.  That certainly is my intention in writing this article. However, my belief in the importance and power of leadership is not just based on anecdotal evidence.  There is a growing body of empirical data suggesting that leadership really does make a difference, and relationships do matter in the bottom line success of any enterprise.  For example, in Good to Great, Jim Collins showed how companies with certain kinds of leaders outperformed the general stock market by an average of 6.9 times.  A decade earlier Frederick Reichheld demonstrated in The Loyalty Effect how improving loyalty in customer and employee relationships can add 25 percent to as much as 100 percent to a company’s bottom line profitability. These represent just a small sampling of the growing body of work that points to the efficacy of leadership and the bottom line profitability of strong relationships. And during these challenging economic times, nonprofit organizations that serve people who are struggling need this kind of leadership more than ever.

Beyond the formal process, my study of leadership has also been a personal journey of growth that I believe has helped us serve our clients more effectively.  It is a journey that began in a very ethnic neighborhood on Chicago’s south side. Called Canaryville, this mostly Irish and Italian enclave was home to many 1st generation immigrants who came to America to build a better life.  There were Caseys, Kellys, Murphys and Flynns, but there were also DeMarcos, Cariottis, Dilabertos, Moraleses, Garcias, Jackabowskis, Feldmans and more.  The neighborhood was truly a melting pot of diversity, but the people were bound together less by their ethnicity and more by their common struggle of trying to create a better life for their families. Living there taught me many lessons about leadership and helping organizations become more effective.

The people there worked mostly in blue-collar jobs in the trades, the steel mills, the Stock Yards or in one of the more coveted positions as a police officer, fireman or city worker.  It was a tough, densely populated neighborhood where people lived in framed single family or two flat homes that were in close proximity to each other.  As a result of all this closeness the people got to know each other and they clearly looked after their own.  When I was growing up as a kid, and engaging in occasional mischief that I thought was undetected; on more than one occasion by the time I got home my grandmother, father and the rest of the family would know all about my misdeeds.  No doubt, several phone calls had been placed by what I considered to be “nosy neighbors.”  Though it was annoying at the time, these people were assuming responsibility for the well being of the neighborhood by teaching us how to grow into responsible adults. That too happens in the best non-profits as people assume responsibility and choose to lead at all levels of the organization, not just at the top. They do so because they care, and because they care the organization gets their best and flourishes as a result. 

The closer I got to adulthood the more benefits seemed to come my way as a result of my being from Canaryville.  Of course, the primary benefit was knowing and being known by quite a few people.  Though I took that for granted and even disliked it at times, I believe those interpersonal relationships helped strengthen both my sense of identity and my security. Beyond that there were summer jobs, special deals, scholarships and other opportunities that I enjoyed, all as a result of the relationships that I or members of my family had developed. At a young age I understood that the more relationships I had, or as people used to say in Chicago, the better “connected” I was; the more benefits that would accrue to me.

Yet, I also knew that “being connected” was a two way, reciprocal street.  In other words, I couldn’t expect to enjoy the benefits of those relationships long term, unless I was also willing to give and serve the people of those relationships. To that point, my father would frequently remind me of my responsibility to the people and the organizations of the neighborhood.  As he used to tell me, I had to “save my favors” and not be greedy. That too is a principle that the very best nonprofit leaders understand. They and their organizations are involved and engaged as members of their communities.

Also, in the process of relationship building, I learned that I couldn’t be disingenuous or insincere because it was contrary to our values to try and use or manipulate people.  Relationship building with a sense of integrity and genuine regard for others had to come first. The benefits were byproducts of building relationships and not the primary motivator for doing so. The primary motivator was a set of values that defined what it meant to be a good Christian, a good citizen and a good friend.  In his own way, my father was both giving me a civics lesson and teaching me the value of establishing and maintaining covenants.  It is a learning process that continues to this day for me and in turn, I endeavor to pass on to my clients. Simply stated, the relationship, whether it’s with an individual donor, a client or a community can’t always be about you. If it is all about you, then the likelihood is high that you are not leading but power wielding and manipulating.

Essentially, what has facilitated that learning process for me is the fact that throughout my life and career, I have had the good fortune of meeting and interacting with a wide variety of people. Those interactions have helped me grow both professionally as a teacher, coach, entrepreneur and consultant, and personally as a student, friend, husband, father, volunteer, church member and more. Those relationships have also taught me a great deal about people and particularly about leadership, and hopefully they’ve helped me improve in both areas.  While many of my lessons have come as a result of mistakes I have made, each of my roles has helped me to learn something important about leading people and living life more effectively. But that too is an important lesson for organizations. They must ask themselves, “What are we learning, what must we do to improve and how can we better lead?”

Clearly, in some cases I had a natural inclination to learn more about how to deal with certain personality types and how to lead.  For example, as a coach I wanted to learn about motivating, encouraging and leading a diverse group of players to higher levels of achievement. My job was to develop the talents in the players entrusted to me and then help them bring those talents to the forefront in ways that contributed to team success.  It required knowing how to motivate players and then how to position them in the right roles, roles that would accommodate both personal and team growth and achievement. Again, and not surprisingly, this is also what I observed leaders doing in the best companies, the best churches and the best nonprofit organizations. The effective leaders I have observed are about developing and empowering others to achieve peak performance. When the Chicago Bulls were in their championship run, several players noted how they became better as a result of playing with Michael Jordan. Simply stated, the best leaders help others around them become more productive and proficient.

In fact, the preliminary observations I made about leadership were really what led me to pursue a more in-depth study and write a book about the dynamics of leadership in the first place.  Now, after more than 20 years of study and many more years of experience, I have learned some of the specifics of what makes a leader effective and why leaders can and do make a difference in the success of just about any kind and size of organization.  Whether it’s parents in a family, executives or Board members in nonprofits, pastors in churches or CEOs in corporations; the degree to which leaders operate within the context and apply the principles of a covenant will be the degree to which their people and their organizations are successful. To accommodate a bit more explanation about how I came to this conclusion, let me back up briefly.

My notion of leadership started to change somewhat in the early 1990s when I began studying both the concept and the power of close, dynamic and highly productive relationships called “covenants.”  Like most people, I understood the concept of covenant in the context of marriage, but I was fascinated to find examples of covenants existing in business, politics, sports, communities and just about every kind of organization I examined.  Though the evidence of covenants existing in organizations is less obvious than in marriage, I found that in organizations where the principles of covenant were applied in relationships, the results were highly beneficial for everyone involved.  That really is when I began realizing both that covenants are the result of leadership and that leadership itself is a covenant.  The more I investigated and discussed these concepts, the more they seemed to resonate with people.  Granted, it’s important for readers to understand that while the presence of covenants between leaders and followers or among stakeholders of an organization does promise to maximize potential, in business or in any other kind of organization; covenants cannot by themselves guarantee success.  True, covenants can greatly enhance the likelihood and the degree of success, but they are not a remedy for gross deficiencies. That point aside, I have also found it to be true that where covenants flourish in organizations, deficiencies are likely to be fewer.

In the course of my research, I have had several hundred separate discussions about covenants. Many of those discussions have been in the form of interviews with individuals from all walks of life including business executives, politicians, ministers, police officers, a fire chief, distinguished educators, sports figures, authors, line workers and just about anyone who would talk about the concept with me.

My first actual writing about covenant was in the form of an article published in the Indiana University Journal of Business Disciplines.  After I published the article, I started thinking and writing more about the idea of leadership as a covenant. That’s why I wrote a book entitled Leadership is a Covenant. I endeavored to make the case from my interviews and observations that leadership is a relationship and not a position and, at their best, leader-follower relationships are covenants and not contracts. What I found in studying nonprofit organizations and businesses alike is the fact that the principles of leadership transcend organizational type. In other words leadership advances organizations regardless of their type. Through this work I endeavored to describe more fully the characteristics and dynamics of a covenant and demonstrate how this relationship captures the essence of what it means to be a leader.

At the start of this article I noted that it has been our observation that more than any other factor, leadership is related to the success of any organization. Let me qualify that further by adding, that the most effective kind of leaders we have observed are ones who approach leadership as a covenant. It is a relationship that is driven more by integrity and giving and developing and growing than it is by receiving and exploiting. It is also a relationship that is less about consumerism and individual rights and more about civics and responsibility. These are the kind of leaders we need in businesses and nonprofit organizations alike, and these are the kind of leaders we encourage our clients to seek. They are not always easy to find because they are also usually a bit humble, but when they are uncovered these covenant-keeping leaders are well worth the wait.

Note: If you are interested in learning more about covenant leadership, Len’s book, Leadership is a Covenant, is available on Amazon.Com. 

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