Many nonprofit leaders focus on the problems of their organizations. And yes, we all have problems!
Scaling Up framework focuses on building capabilities. It will change your mood and the mood of the staff team. It leads to the Deep Work that Cal Newport writes about. It brings happiness to doing good things.
Which way do you choose to lead?
I particularly recommend
Nonprofits are just a special version of all companies. It takes resources to do things. The activity needs to generate more resources so that more can be done. There has to be a sustainable plan.
https://bookauthority.org/books/best-nonprofit-ebooks
The other 51 – let me know if you find a good one!
This weekly club meeting talks about stress that CEOs and Executive Directors feel when employees don’t do the right things at the right times and life gets difficult. Perfectly happy Directors and Presidents are not eligible for membership. This week, I’m thinking about why employees get the job description and don’t understand the job.
Job Description
In a former job, I was also half of the HR department. I wrote job descriptions for every job. Since the job involved children, I carefully added that you have to be able to get down on the floor with kids and lift 70 pounds. The description is great – but has so many details in it that’s its impossible to know what the actual job is. While it’s critical to be able to carry a child in a fire, the day to day work for the appraisal is quite different. In 10 years, staff had to pick up a 70-pound child one time! How do you protect yourself without hopelessly confusing your new employee?
What is the job description? The job description outlines the legal limits of your authority. If you are the first grade teacher, you cannot pay bills. It’s not in the job description. You don’t have the authority. The job description describes the limits of the job but employees want to know what is the core of the job?
Job Scorecard
There are several systems online to identify simply what the job is about. The job scorecard is what the job is really about. It’s simple enough for employees to understand. It protects them because you write down how you measure success. Many employees try to be successful if they know what you want.
Some employees won’t give their best until they understand what you want. I like a 10 point job scorecard that has 4 sections. I can tell the staff very simply what the job is about and they are not surprised later in feedback and appraisals.
Example: Accountant
Isn’t that simple?
Keep the job descriptions because they keep jobs from changing without good reasons. They protect both manager and employee in moments of tension.
Use the job scorecard to do appraisals and help the employee understand how they add value to the company. Your employees will not understand you until they know what you want. Job scorecards help!
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The CEO job is challenging. A business coach can help and contact me if your team needs support to go through this process.
This weekly club meeting talks about stress that CEOs and Executive Directors feel when
employees don’t do the right things at the right times and life gets difficult. Perfectly happy Directors and Presidents are not eligible for membership. This week, I want to deal with the stress of the 18-36 month window.
ReHire
When you first take the CEO job, you have to rehire all of the people who report directly to you. Perhaps you assumed that they are good sheep and will simply change to a new head sheep?
Not so.
Someone who now reports to you isn’t confident and you make them nervous. Someone else wanted the job that you have. Someone else has been cutting corners (with time and attendance, expense account, etc) with the last boss and wonders how to test your tolerance. And so on. You thought it was a greener pasture, but all greener pastures have manure!
Meet with each direct report and help them show their best side to you. Recognize their talents, skills, values and passion. Meet together as a team and give staff an idea of your most important values. My own personal values include:
Result
The result of the rehiring – people feel respect for who they are and what they have accomplished and they have a clear idea on how to work with you. In most cases, this is a great start.
Review
Research shows that effective CEOs will need a 50% change in leadership team in the 18-36 month range. The management mix requires a team that can be effective under your leadership. In some cases, the reporting managers also see this and create their own retirements and resignations. This is not a sign of poor leadership as long as the revolving door stops within 24 months. It’s what is needed to take the organization to the next level.
The review period is where you set up a job scorecard for each position with the help of the leadership team. The process is necessary but it will point out some managers who are not in the right seat or not a match for the next phase of the company.
Repair
The discernment process is a time where you meet with some direct report about needed changes that may bring about transition. It’s also a time to see if you have followed the Rehire and Review process.
Failure to rehire can cause leadership challenges in the first 12 months.
Failure to retire people that you do not enthusiastically want will cause problems in year 2. According to the Rockefeller Habits Question 1, you need a leadership team that understands each other’s differences, priorities, and styles and a team that is able to engage in constructive debate. And you need team members who function flawlessly so that you are leading instead of repairing problems. Here are 3 Repair Steps.
CEOs can let problems slide, but my Personnel Consultant always said, you can’t cure cancer with aspirin.
The CEO job is challenging. A business coach can help and contact me if you need support to go through this process. But with or without support, most Executive Directors inherit leadership teams with issues. The issues can be managed – and the Board was wise enough to hire you to do it.
Rehire, Review, Repair.
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A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.
I’ve had experience with three effective volunteer organizations – the United Methodist Women, the typical traditional Black Church, and an Indo-Chinese Caucus. Of course, you may know many others.
If you want to grow and scale your mission – do you have a chance of success with volunteers?
A lot of us are very familiar with difficult volunteers on committees, co op boards, community boards, and church trustees. Finding volunteer structures which work well is like the bitcoin investments. They look reasonable but most people are finding bitcoin mine (fields)!
What lessons can we see from non-profits that use effective volunteer teams?
Sadly, I did not take their good examples to spread a culture of accountability in the organizations. It is socially awkward and sometimes splits small organizations when families are involved and one member is called to accountability. One family with 5 children wanted a church to provide a part time job to the oldest undisciplined boy. He was called to task after wrecking a riding mower but the family still left the church.
3. They have the skills and interest in the job that they accepted. There was a screening process that ignored politics and chose people who could actually do the job. I remember a chair of a Boys and Girls Club who was enthusiastic about generosity and also raised funds. Contrast that with people who get on the Finance and Stewardship committee because they are nosy
4. They are recognized. The traditional Black church has been very effective with titles and recognition to sincerely thank people who accept the volunteer responsibility.
5. They have a sense of community. The Indo-Chinese caucus had meetings until 2 in the morning and endless other meetings to drive action that affected American Indo-Chinese communities and homelands. No one looked at the clock because there was such power in solidarity.
Most of the websites that I check tell you about effective practice for volunteers. Since you’re reading this, your problem is taking an ineffective structure for volunteers and changing it!
When you start the process, you are going to get pushback from stakeholders who like things the way that they are:
Getting past these barriers to effective volunteering is a lonely and soul-searing task at times. And volunteering is declining in the USA (Murphy, 2015). So we are getting the volunteer dregs plus the smaller number of qualified people.
I honestly can’t think of a solution that does not involve coaching. The coach offers the leadership team support and clarifies the plan to be effective and successful through volunteer support.
Maybe you’re tempted to give up after this report? Never! Volunteer effort still remains a powerful resource to scale your nonprofit work! Like everything else, you can’t do something meaningful that doesn’t involve emotions.
The golden nugget – accept some uncomfortable emotions and get a coach to guide the process of the leadership group. Success and a culture of accountability is the result!
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GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.
A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.
Notes
Murphy, N. (2015). 3 Disturbing Facts About Volunteering in America. The Cheat Sheet. Retrieved 11 March 2018, from https://www.cheatsheet.com/business/why-a-drop-in-volunteering-is-bad-for-everyone.html/?a=viewall
President Obama said in a recent interview on Face the Nation that the most critical quality for a good President is to form an effective team because the job is simply too big without great support (7/24/2016). His comment is actually the Key Performance Indicator for anybody who is leading a company.
Your job is to choose wisely, lead the team, and solve team disputes!
It’s critical to know if you have chosen staff wisely. Most companies now spend more on service and administration than manufacturing. The balance sheets of older days focus on hard assets but most of your company is likely to be service and administrative. You need a balance sheet that measures whether your staff are building your company or wrecking it.
The literature on determining the asset value of employees is still emerging. While various models each have their benefits, it’s easy just to set up parameters and starting thinking in this new way.
I will present 12 elements of an Employee Asset Based approach. I follow that with three examples of a new staff hire, a valued older staff member, and a problem staff.
Elements of Employee Asset Based Value
How would this look in the real life examples of Jim, Elisa, and Beth?
Jim – The New Hire
Assume that you pay market rate for Jim who is capable of fulfilling the position description for teacher. That is all expensed as payroll. Assume pay of $40,000 per year. Debit that amount to payroll expense (just as normal)
Review the list of 9 Elements –
Jim has a Masters in Bilingual education and the DOE would pay $52,000 for this. Credit $24,000 to Equity Professional Added Capital and Debit $24,000 to Professional Assets. Since you expect the teacher to stay for 2 years before the DOE discovers the difference, credit a depreciation account for Professional Assets for $1,000 a month (2 year schedule) and debit expense for Professional Expense.
Add nothing because there is no history to indicate
Add $6,000 because he will take CLASS Professional Development and depreciate over two years – his expected tenure
No addition because there is no knowledge of history and culture
Add nothing because he has no network
Change nothing because he is not yet part of a team. You need his truthfulness, compassion to others, and willingness to live for company results more than his own. If he steals, lies, cheats clients – these will all reflect badly. If he has a reputation for peace and justice, then it adds value.
Change nothing because you do not know about accepting accountability
Add $9,000 in expected future profit because you believe that the presence of a Dual Language UPK teacher will add two seats to the three year old program and 2 retention effect students in After School programs. Add this in the same manner as # 1 and Depreciate over 5 years to account for the final residual effect.
Add nothing because this will be established by Jim’s performance
No, subtract nothing as the compensation is correctly established.
Change nothing because you don’t know. This score is the sum total of all the desired attributes fitting into a package that adds value
Change nothing because there is no history to indicate
Summary for Jim:
You hired him at $40,000. He adds $39,000 of value to the balance sheet. That amount will be depreciated over the remaining expected time of employment. The balance sheet should be adjusted in the yearly appraisal with Jim. He should see his value to the company and propose how to increase it. He correctly may feel that his compensation should be adjusted in Year Two.
On the surface, you have made a smart opening choice. The continuing months are critical as they will add or destroy value.
Elisa – Hired 10 Years Ago at Age 40
Assume that you pay less than the market rate of $50,000 for Elisa who is capable of fulfilling the position description for Human Resources. Assume pay of $40,000 per year. Debit that amount to payroll expense (just as normal). The $30,000 remaining is added to Professional Assets and Professional Added Capital and depreciated over 3 years)
Review the list of 9 Elements –
None, so no added asset
Elisa is totally committed to the mission of the company and stays late and takes work home. She is a model for younger employees. Add $60,000 and depreciate over 3 years.
You will propose a certificate course online for $5,000 because it will give her more skills and increase her expected date of departure by one year. Add to Professional Assets and depreciate over 3 years.
Significant knowledge of history and culture. It will take 3 months of compensation to replace. Add $10,000 to Professional Assets and Professional Added Capital and Expense over 3 years.
None, so no added asset. It is carried with Historical knowledge
Elisa has age and experience and a kindly manner. She works in the background with you to keep the team together and let you know quietly about unresolved issues. It’s worth $30,000.
Elisa rarely makes an error. She knows that her value to you is in being correct. Her determination not to disappoint relaxes you to focus on the leadership job. It raises your effectiveness by $60,000 over 3 years.
Not a consideration since she has little effect in Marketing or Program
Add nothing
No, subtract nothing as the compensation is correctly established.
She is highly valued and the overall fit with the team is worth $45,000 over three years
Change nothing
Summary for Elisa:
You hired her at $40,000. She adds $240,000 of value to the balance sheet. That amount will be depreciated over the remaining expected time of employment. The balance sheet should be adjusted in the yearly appraisal with Elisa. She should see his value to the company and propose how to increase it. She correctly may feel that her compensation should be adjusted in Year Two. She may have other proposals because she understands the appraisal and company very well.
You have made a smart choice in Elisa and retained her. Your leadership skills will be tested to retain her but it’s worth the struggle.
Beth – Hired 20 Years Ago
Assume that you pay less than the market rate of $40,000 for Beth who is barely capable of fulfilling the position description for Secretary. Assume pay of $28,000 per year for 10 years. Debit that amount to payroll expense (just as normal). The $120,000 remaining is added to Professional Assets and Professional Added Capital.
Review the list of 9 Elements –
None, so no added asset
Beth is unfocused. She isn’t determined to accomplish the job because it’s all hazy in her mind. Showing up is her idea of determination. Unless she has a critical errand for her family. Debit $10,000 per year to Professional Added Capital and Credit Professional Assets. Unfortunately, you assume she will work until retirement in 10 years so the total debit and credit is $100,000
Ha. The last thing that she learned was where a new restaurant opened for lunch
$1,000 ($12,000 over 10 years). Beth knows how the boiler works when there is a problem
None, so no added asset.
Beth has disappointed many employees over her career. They see that she gets paid for doing very little. She actually accounts for $100,000 ($10,000 per year) in reduced effort by others because they see that hard effort does not pay.
Beth always has a reason that a phone call was lost or mail that wasn’t sent. She costs about $120,000 over 10 years.
Not a consideration since she has little effect in Marketing or Program
Add nothing
No
No, She destroys about $5,000 of value annually ($50,000)
See above
Summary for Beth:
You hired her at $28,000. The sum total of credits and debits to the Balance Sheet is a negative $238,000. Debit to Professional Added Capital and Credit to Professional Asset. That amount will be depreciated over the remaining 10 years of expected time of employment.
You have a choice to make and your leadership skills will be tested to fire her and replace. Beth has one skill and that is to keep this position. She knows a Board member or she scares people or she is older and can’t get another job or she has an alcoholic husband and pays the bills. You can only remember that you’re not her father, mother or banker. You have a responsibility to the company and the people who receive its benefits.
Conclusion
Notice in these three examples (drawn from real life examples) that the real value is added by longer term employees who are effective (+$240,000). The biggest effect is not firing those who are destroying your company (-$238,000). New employees typically add the least (+$39.000)
In this example, you can increase the asset value by $279,000 or $41,000. The non performing staff member will kill your business.
What will you do this week to add Professional Capital to your company?
Notes
Russ, Meir. Management, Valuation, and Risk for Human Capital and Human Assets: Building the Foundation for a Multi-disciplinary, Multi-level Theory. N.p.: n.p., n.d. Print
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A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.
We all look at our financials to determine how the company is performing. The problem with your financials is that they were invented in 1494 by Luca Pacioli (improving the Babylonian system of 5000 BC.
Would you not agree that an update is necessary?
The current financial system is oriented towards manufacturing. In 1995, service industry portion of high income economies was 66%. I can guarantee it’s grown since then.
Recording Labor as an Asset
There have been three economies in history – agricultural, industrial, and technological. Current financial accounting is dangerously biased towards an industrial economy that does not record the financial position of high income countries and their companies.
In high income countries, labor can now be divided into 3 parts.
In the current world, you will face a dearth of talent to hire and a million resumes from skilled and unskilled labor every time you post a job.
What to do?
Next Steps
What do you do with assets? You increase their value and extend their useful life.
Conclusion
We cannot solve the life problems of labor that is not needed. This is where government policy and philosophy steps in to guarantee an economic floor.
For the current moment, you need to add value to labor to turn it into an asset. You will find that employees are so thrilled that most will stay longer than your conservative estimates of an asset allowed. You will win. They will win. Your stakeholders will win. The best kind of scenario.
Meanwhile, your balance sheet reveals a true picture of your expense and assets as an organization. Are you ready for the current economy? Your new balance sheet will tell.
If you want One Minute TurnArounds by email, please sign up!
GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.
A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.
Sources
“Growth in the Service Sector.” (n.d.): n. pag. World Bank. Web. 16 July 2016.
Management, Valuation, and Risk for Human Capital and Human Assets: Building the Foundation for a Multi-Disciplinary, Multi-Level Theory . Palgrave Macmillan. Kindle Edition. Russ, Meir. N.p.: n.p., n.d. Web.
Abstract
CEOs need to invest intentionally and annually in professional development for key staff in order to achieve the objectives of the Strategic Plan.
Adding a New Asset
Many nonprofits are service industry corporations with few fixed assets.* That means the success of your company is the result of your wise use of two items:
Meir Russ argues that you need to take your key managerial training expense out of the Income Statement (Expensed at a year or less) and make a supplemental Balance Sheet with a new category of Managerial Assets. So the success of your company is now the result of your wise use of three items:
The rationale is that we invest in our key managers with the expectation that they will bring new skills to work everyday and that new productivity will last more than one year. This is not that novel an idea in other industries. Performers already look at life this way. They insure parts of their body with the expectation that its value will last more than one year. “As the Beatles sang “I wanna hold your hand”, their business managers were busy insuring their fingers for £200,000 – a colossal sum at the time…. More recently Bruce Springsteen’s voice was covered for $3 million.” (Hunter, 2003)
Let’s assume that your average key staff member has a job tenure of 5 years in your company. Create a supplemental Balance Sheet that records the professional development asset and depreciate the expense over that period of time instead of the normal pattern to expense it all in the year that it occurs.
The result is to showcase whether you leverage talent with training or are satisfied with the current state of affairs. If the new account has a balance of $0, I can predict the failure of your Strategic Plan.
Intentional Investment for Success
Your key players face the struggle to implement the Strategic Plan. If they don’t do it – what is your Plan B? The Strategic Plan, by definition, is not easy. Your key managers need to improve their skills to meet the challenge of tomorrow. Placing those expenses on the balance sheet gives attention to :
Like anything else I write about, these conversations are about as pleasant as a trip to the dentist. But the CEO is solely responsible for the wise use of labor, materials, and assets to accomplish the Strategic Plan. Leveraging the value of your managers is arguably the most strategic action that you can take. Publicly reporting it will make sure it happens and it’s also a better way of looking at leading the company than Financial Accounting allows.
Increase Tenure of Key Managers
All of us have a dream of who we can be. I have met very few employees who really feel that they are in the perfect place. I can tell you that if you tell a key employee that you are willing to invest $5,000 every year in their professional development, you are guaranteed to extend their time in your agency. Your reports will feel appreciated and understood.
You can’t keep progressing on the Strategic Plan when key talent quits repeatedly. They take too much institutional history and culture with them.
Tell your board that you can keep a key staff member Ms. Gold 7 years instead of 5 years for $35,000 ($5,000 per year). Mention that you can implement a key objective of the Strategic Plan with the help Ms. Gold. If I could get that bargain, I’d give the extra $35,000 myself!
Conclusion
You are richer than you thought. Those managerial Professional Development Costs are not going to be used in one year. They are going to stay for year 2, and year 3, and year 4 …….. They are one of your keys to complete the Strategic Plan. You simply must treat them that way.
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GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.
A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.
*Hospitals and museums are examples of capital intensive nonprofits. The rationale of the managerial reclassifying of expenses should still be valid.
Hunter, Teresa. “What Price an Arm or a Leg?” The Telegraph. Telegraph Media Group, 29 Jan. 2003. Web. 07 June 2016.
Russ, Meir. Management, Valuation, and Risk for Human Capital and Human Assets Russ (2014-10-15). Management, Valuation, and Risk for Human Capital and Human Assets: Building the Foundation for a Multi-Disciplinary, Multi-Level Theory . 1st ed. New York City: Palgrave MacMillan, 2014. Print.
There are ways to manage the risk gap between authority and responsibility in your organization and this article is about three of them.
