Nonprofit boards and management, large and small, can suddenly be subjected to the trauma of an event that will shake the organization to its roots! While I am sure that larger nonprofits like the Red Cross have crisis management plans in place. I have yet to encounter a mature mid-sized nonprofit that has even considered anything beyond a temporary replacement for the executive director should he/she is incapacitated.
Yet it’s essential that every board chair know what to do if the executive director calls at 3AM to report that the nonprofit facility is on fire! With about 16% of all fraud losses emanating from nonprofits, how should the board chair respond when a new auditing firm reports that the executive director has been using thousands of agency dollars for personal expense?
In either of these instances, the board chair and members must be prepared to step into leadership positions that are frequently out of their comfort zones. A plan to deal with a crisis of any sort should be in position and reviewed by board and management on an annual basis. Here are some suggested topics that need annual updating:
The Initial Crisis Period
This is usually chaotic because with mandated turnover it is likely that about one-third or more of the board members or more are newly appointed. Many will likely be serving on a board for the first time.
If the board chair and executive director are not competent to meet this challenge, the board will need to be quickly assembled to select another board member.
In the midst of the turmoil, board decisions have to be made, and it’s important to determine who will make them. For example, one person needs to be designated to be the spokesperson to meet with the press. If the board chair and executive director are not competent to meet this challenge, the board will need to be quickly assembled to select another board member. The remaining board members must be cautioned to refer all questions to the spokesperson. Other decisions will revolve around scheduling special board meetings and additional decision making responsibilities needed for the executive committee. Also board members should be available to assist management and decide whether or not legal counsel needs to review major board and management decisions.
Control the Organization
Hopefully management will be strong enough to develop emergency processes to continue to serve clients. The Board and Executive Director will need to focus on other facets of recovery such as major expenditures, governmental reports and insurance claims. These efforts may require use of outside experts if the nonprofit’s reputation is being challenged as a result of the crisis.
To make sure that recovery efforts on board and staff are being coordinated, a small task force of board and staff members can meet to review accomplishments by both entities.
“In the first phase of a crisis, it’s rare for technical, legal or operational issues to be resolved. At this stage, the most pressing concern will likely be to reduce the anger and extreme reactions of some stakeholders, while buying time for the legal and technical resolution personnel to complete their work.” * In the case of nonprofits, the stakeholders may be employees or funders. If mismanagement is at fault, community or industry rumors may surface through word-of-mouth or social media. Steps need to betaken to assure clients that the nonprofit continues to be trustworthy.
Some nonprofit boards with sufficient reserves may decide to engage a public relations firm to communicate with stakeholders, especially if the crisis is a complex one, e.g. financial fraud by senior management. In my opinion these firms can be useful in an advisory fashion, but the board and management need to share responsibility for stakeholder crisis communication.
Repair the Root Causes
“The root causes of crises…are often people issues (culture, decision rights, and capabilities, for example), processes (risk governance, performance management and standards setting) and systems and tools (maintenance procedures).“ *
It’s obviously important to search out the root cause as quickly as possible. But a full understanding may be elusive, especially if the root causes relate to the people issues cited above. That’s why overviewing talent for crisis leadership is such an important nonprofit board responsibility. In my opinion, it is rarely given the attention that it needs.