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Charles Clayton, Oxford Leaders (www.oxfordleaders.co.uk)

BOARD MEMBERS: CLAIM YOUR EXPENSES!

“I don’t claim expenses; it’s part of my giving.”

We’ve all heard comments like this from charity trustees and our usual response is gratitude. They donate their time and expertise, and they minimize costs.

I believe this needs careful rethinking because of some negative consequences, even when the givers have the best intentions.

In summary, there are five problems: board member equality, staff integrity, international development standards, accounting transparency and the impartiality of the trustees. The last one is the most important: fiduciary problems evolve slowly but eventually become a culture which can undermine the organization itself.

“What,” you exclaim, “all that because I don’t claim expenses?” Yes, it is an alarming thought, but it does happen.

First, let’s consider what is right about the practice of not claiming expenses: it expresses a generous and sacrificial spirit; it endorses the charity; it directly reduces costs; and it sets an example for the whole organization.

Now let’s consider the downside. This requires a longer perspective in five areas:

1. Equality. Less well-off members of the board feel under-valued, perhaps even second-class, in a subtle form of ranking. In time the board stops recruiting “poorer” individuals because they can’t compete with the obvious generosity of others, and the best seats are reserved for those who give the most or cost the least, irrespective of their skills.
2. Staff confidence. Employees, including the CEO, are reluctant to challenge the plans of a generous board member. The situation becomes critical if the member actually pays for an initiative; strategic or not, it might never be questioned.
3. Rights of the poor. Many NGOs use a “rights-based” and “locally-owned” methodology in which beneficiaries have some control over their own development. This principle is sacrificed when board members try to force top-down decisions in operational matters. Force may sound like a strong word, but that is exactly what it is. A sense of obligation can become operational leverage.
4. Accounting probity. Declining the reimbursement of expenses is a form of giving which, if not recorded, renders the accounts inaccurate; they no longer reflect the value of goods or services given in kind, and this omission disguises the real cost of doing business. This is especially important in the matter of overheads, and it might sometimes be illegal. In large NGOs with boards around the world, the non-disclosure of expenses can materially affect their ratios. And there is a sting in the tail: the very fact of it, no matter how well intended, legitimizes “creative accounting” by everyone: after all, if the trustees can do it, so can everyone.
5. Impartial trusteeship. This is the most important aspect of all, as it leads to the erosion of fiduciary roles. Trustees are supposed to be objective and impartial, the face of public accountability and the guardian of the charity’s standards. But if their decisions are leveraged by subtle obligations, alarm bells should ring.This is a fundamental problem. If a trustee waives reimbursement for expenses then, right there, an internal power-play starts with an unspoken message that “the organization owes me something.” By the time the damage has become serious the opportunity to fix it has also passed. Please note: power is not wrong in itself – on the contrary, it is right and necessary. But the wrong use of power jeopardizes that most precious element of trusteeship, which is objectivity. The older term for it was “disinterest”.

So what is the solution? If you are a member of a charity board, there is a simple way to promote transparency in this matter: Always claim and always reimburse all expenses for all legitimate purposes and fully record everything.

If you want to support the charity financially, give a free and anonymous donation. Do not give any hint of it, not even a faint smile of recognition if it is mentioned in a discussion. If the names of donors are published, make it a rule always to omit the names of the trustees. The principle is the same for those charities which pay their board members; it should be on a strictly contractual basis without an option to forego any payment.

Finally, let’s consider the underlying psychology. In my experience the problem is seldom a case of mischief or malfeasance; nor is it stupidity. On the contrary, intelligent people are usually acting with good motives. The problem is that we tend to switch off our awareness of the broader implications when we are engaged in acts of personal generosity. It is difficult to avoid subjectivity when our own money has been involved.

In short, I am suggesting that the principle of donor discretion applies supremely to the trustees. If their giving is anonymous and if all their costs are reimbursed as a matter of course, then there is a much greater chance that they can do their job objectively.

So, board members, for the sake of your charity, please claim your expenses!

Charles Clayton
Oxford, 17 November 2010

TRENDS IN NON-PROFIT LEADERSHIP

Here are the main trends that I observed from an extensive listening exercise among the top leaders of selected non-profit organisations on four continents from October to December 2009.

Three encouraging strengths:

(1) STRATEGIC CAPACITY: More than 50% of the leaders I interviewed have skills in strategic planning, or have these skills among their senior staff or board members; and they are using this knowledge effectively in their organisations.

(2) PERSONAL SUPPORT: Most of the leaders I interviewed are aware of their own need to develop professionally and have sought out training courses, professional mentors or relevant reading materials in the last twelve months. It also made them hungry for more training, mentoring or coaching.

(3) FRESH VISION: Most of today’s top leaders are renewing their vision for their non-profit organisations. It seems that the current pressures of the worldwide financial downturn are driving out complacency and motivating leaders to clarify their strategic objectives.

Four challenging needs:

(1) TIME TO THINK: Many leaders are swamped by public demands, in addition to internal demands such as emails and other administration. There is no time to think and reflect, yet this is a key responsibility in leadership. The underlying reason is a lack of sustainable funding and the need to set an example in frugality, and costs are cut by reducing the support staff. The CEO’s “thinking time” is often sacrificed for “emailing time”.

(2) PRODUCTIVITY METRICS:  This need was expressed most by Australian CEOs, who are very concerned about how to measure the “outputs” of their charitable work. It is most likely a result of the Productivity Commission, a government regulatory body which wants to see measurable results in public services. This is also appearing more in the US context, as donors are ever more pragmatic and expect to see quantifiable results for their donations. The trend will doubtless increase in Europe too!

(3) SELF-MOTIVATED TEAMS:  There is a widespread desire among CEOs to have management teams who have a sense of urgency, who take initiative and don’t need to be pushed to implement the work.

(4) BOARD DEVELOPMENT: Many board members need training and challenging. But the CEOs are not in a good position to provide this, so they prefer to rely on external facilitation.

INTERESTING COMMENTS heard in the course of these interviews:

“My biggest challenge is not how to get rid of bad people; it is how to deal with mediocre people.”  (Europe, public servant)

“You have to learn who are the gatekeepers in your organisation. Sometimes it is your personal assistant.”  (Said by charity leaders in both Europe and Australia)

“In my experience, the leaders of [religious] organisations are less likely to express a need for training; they assume that being ‘gifted and called’ is sufficient.” (USA, Christian charity leader)

“The greatest impediment in my leadership is my own communications ability; I want to learn how to bring others up to speed with what is in my mind.”  (Australia, charity leader)

“We have no performance reviews, no development, no strategic plans, no spare money, no time to think, and we have a severe work overload throughout the organisation. We just need to manage the stress.” (NGO leader)

“Great listeners make great preachers.” (USA, Church leader)

“We have only one way of developing people: hire the good ones and fire the bad ones.” (International NGO leader – paraphrased!)

“I need leadership development internally, in my own situation, not just by external courses. But I need mentoring externally, outside my situation, not just by my boss.” (Middle East, NGO leader)

“You should have asked: what gets in the way, what holds you back, what obstructs your leadership? I really want to talk about that.”  (Australia, charity trustee)

“If we can get the people right, the money will come in.” (USA non-profit leader, when asked why he didn’t mention money in the interview. They have subsequently reported a good year of funding in 2009.)

“Leadership? I never thought about it. I just make sure that we are all pointing in the same direction, select the right team and work at supporting them.” [not bad!]  (European educational leader)

And finally, how (not) to inspire your staff….

“Our CEO counts the toilet rolls. If we use too many, the costs are deducted from our wages.” (NGO employee)

With my personal thanks to all the leaders who took part in this exercise,

Charles Clayton,
Oxford, 20 January 2010