Assignment
Remember, nonprofit organizations can't make a profit, but they must take-in more revenues than they expend to survive. As the text, Nonprofit Management Principals and Practice by Michael Worth, suggests, earned income strategies are sometimes a good way of diversifying revenue sources and furthering the organization's mission. Read the case below then elaborate on the following questions:
1. If you are on the board of directors, how do you vote and why?
2. What are the strengths, weaknesses, opportunities and threats facing the Legal Education society?
3. What role do boards of directors and personnel have in setting organizational missions and implementing organizational priorities?
Case Study
LEGAL EDUCATION SOCIETY
The Legal Education Society has been in existence for several decades. Its mission is to provide legal assistance in a variety of ways-legal aid to individuals who cannot afford it, legal assistance to nonprofit organizations, and scholarly contributions to advance the public's understanding of the law. The multiracial board of directors of the Legal Education Society is composed of lawyers, judges, and private citizens representing different socioeconomic groups. At present, the organization is adequately funded, has a modest endowment, and has a permanent staff of twelve people.
In 1983, the Legal Education Society hired a woman who was widely recognized as one of the brightest young lawyers in the country to be the society's executive director. She had been on the Law Review at a prestigious law school, had contributed significantly to the law literature, and had spent two years clerking for a Supreme Court justice. Her appointment was hailed as a turning point in the history of the Legal Education Society. However, it was a turning point in a way that no one had expected.
During the first four years of her tenure as executive director, the young woman pleased everyone. She added programs, secured increased funding, wrote important articles, attracted new staff (including minorities and women), and appeared to be the dynamo that everyone thought she would be when they hired her. After four years, her interest began to shift. With her growing prominence in the field, organizations throughout the country wanted to hire her as a consultant to advise them on setting up legal education programs.
At first, she accepted these assignments only on weekends and vacations, having received permission to do so from the board of directors. But as the demand for her consulting services grew, as her own interest in these projects increased, and as the scope of the projects demanded greater time commitments, she asked the board whether she might set up a small consulting program through the Legal Education Society, bringing the consulting contracts through the organization. The advantage, she explained, would be that the Legal Education Society could earn income and expand its influence nationally in the field of legal education.
At first, the arrangement worked well. Two large contracts during the first year netted the organization $42,000 in additional income. The Legal Education Society was cited as a leader in its field. The executive director, with the assistance of several key staff people, continued to be happy with the challenge and growth of the consulting work, but the Legal Education Society's primary constituency back home was becoming restless. The focus of the organization was changing. Individual staff members appeared to be less-interested in their constituents problems as they became more focused on the problems facing people halfway across the country. The board of directors was receiving conflicting signals. The national press and funding agencies throughout the country were praising the work of the Legal Education Society; the local constituency (individuals and organizations seeking legal assistance) was complaining about inadequate service.
On the fifth anniversary of the executive director's tenure, she proposed a major restructuring of the Legal Education Society in which the consulting business would become-within five years-the major activity of the organization. Her plan, brilliant in its conception, saw the organization doubling its budget and staff during that period and becoming far less reliant on grants. Legal assistance would still be provided, but it would be offered through a number of subcontracts, and the Legal Education Society would simply act as broker.
One of her justifications for the plan was especially compelling. At the time, federal and state governments seemed to be placing less priority on the funding of legal aid programs and the private sector did not indicate enthusiasm about making up the difference. Realistically, there was less money available and greater competition for that money. By way of contrast, the consulting business offered a very promising financial future. There was no doubt in the minds of those serving on the board of directors that the executive director could pull off the plan. Her ability had been proven time and time again. There was also no debate on the question of the short-term funding outlook. Simply stated, the funding picture for basic legal services looked bleak. However, the board of directors was concerned about what impact the change would have on the organization's central and original mission. Although a consulting business would ensure organizational survival and continued growth, it would also mean a major shift away from basic legal services for the poor and for nonprofit organizations. That need existed, now more than ever, and several community members of the board of directors argued passionately that the organization must return to its original purpose.
The question was debated for two months. Surveys were conducted both among constituents and national authorities. At first, the majority of trustees seemed to favor the executive director's plan. But another group stated unequivocally that it was the legal obligation of the board of directors to safeguard the organization's mission and they threatened to seek the support of the state attorney general to compel the board to reject the plan. In the end, the board of directors, in a close vote, turned down the executive director's request and called for a new plan that would return the organization to its original mission. A year later, the Legal Education Society had a new executive director, a smaller (and mostly new) staff, a smaller budget, many new board members, and a clear sense of its place in the community. The old executive director had started her own consulting firm, which was staffed with many of her former employees.
One of her first clients turned out to be the Legal Education Society, which even now continues to draw on her experience and expertise. Did the board of directors make the right decision? Some people would say yes, some would say no. It is unlikely that the state attorney general would have intervened in the case-although in theory he would have had legal standing to do so had some of the trustees convinced him that the organization's mission was being compromised. Regardless of the merits of the case, the fact that such a legal action was threatened indicated the troubling aspects of the executive director's plan in the minds of some trustees. In the end, there was no right decision because "right" depended on each person's point of view. In spite of this, there was a correct and responsible course of action, which was the decision to debate the executive director's plan in an open and informed manner. The trustees considered the question of mission on the one hand and organizational security on the other. They weighed their options and came down in favor of a recommitment to the original mission.
Those who disagreed (the executive director, some of the staff, and some of the board members) left the organization, and although they were disappointed with the decision, all believed in the integrity of the decision-making process. The organization had successfully
met the challenge of risk/survival analysis.
From: Wolf, Thomas. (1999). Managing a Nonprofit Organization in the Twenty-First Century. Simon and Shuster.