NPQWinter

P r omoting Spirit ed N onpr ofit Managemen t W i n t e r 2 0 1 5 $19.95 Winter 2015 Summer 2013 When the Show Must Go On: Nonprofits & Adversity Title TK When the Show Must Go On: Nonprofits and Adversity Cohen on Detroit’s “Grand Bargain” McCambridge on the Stakeholder Revolts of Sweet Briar College and the San Diego Opera Volume 22, Issue 4 Cunniffe and Hawkins on the Renaissance of the Nonprofit Arts Sector

Volume 22, Issue 4 Winter 2015 Features 26 A City in Remission: Can the “Grand Bargain” Revive Detroit? 5 Welcome In this comprehensive analysis of the state of Detroit, the unmatchable Rick 6 The Nonprofit Ethicist Cohen unpacks the city’s past, present, The unparalleled Nonprofit Ethicist and future challenges through the lens weighs in on conflict-of-interest of the “grand bargain.” questions. by Rick Cohen by Woods Bowman Page 8 8 Making the Most of Stakeholder S p ec ial S ec tion: Revolt: The Recapturing of Nonprofits on the Edge the San Diego Opera and Sweet Briar College 50 Saving the August Wilson Center The August Wilson Center seems cursed This article about stakeholder uprisings by a failure to launch, yet has managed looks at how two organizations with so far to stay (barely) afloat. What lies very similar situations transformed ahead for this troubled organization? their modes of governance and by Anne Ferola, Jennifer Ginsberg, and engagement with their networks. Martice Sutton by Ruth McCambridge 58 Rebirth of a Birth Center 16 Staging a Comeback: How the Page 16 Holy Family Services has been stuck in the first stage of organizational Nonprofit Arts Sector Has development for over three decades. Evolved since the Great Recession Can it evolve? The arts sector took a huge hit during by Sara Grawe and Shujia Gu the recession, and has been slow to recover. Why is this so, and what does 64 Network as the Form: it say about the future of artmaking Reconfiguring Architecture organizations? for Humanity When AFH folded, its chapters stepped by Eileen Cunniffe and Julie Hawkins up to carry the mission forward. Can this newly formed multihub organization maintain its resilience? by Josh Bevan, Sonja Lengel, and Page 26 Joseph C. Mester COVER DESIGN BY K ATE CANFIELDGROUP COVER ART: “LA BAYADÉRE” BY INGRID BUGGE/WWW.INGRIDBUGGE.COM; WWW.BALLETPOSTERS.DK

D epar tments 71 Why Funding Overhead Is Not the 84 The Public’s Trust in Nonprofit Real Issue: The Case to Cover Organizations: The Role of Full Costs Relationship Marketing and This article is a call to arms to Management Page 50 nonprofits and funders alike What defines public trust, and how do to banish the overhead ratio and you restore that trust once it has been embrace the concept of full costs. damaged? This article identifies core by Claire Knowlton nonprofit-public transactions, offers methods for restoring trust that has 77 Movement-Building Opportunities been impaired, and includes a guide to for Change: Perspectives on managing transactional relationships Criminal Justice Reform Today commonly conducted with the public. Based on findings from key interviews by Herrington J. Bryce with grassroots organizers and national leaders in the criminal justice reform movement, this article describes the state of the movement to end mass Page 58 incarceration. by Margaret Post and Sian Ófaoláin Page 64 NoNprofit iNformatioN NetworkiNg associatioN Ruth McCambridge, Executive Director NoNprofit iNformatioN NetworkiNg associatioN Board of directors www.npqmag.org Ivye Allen, Foundation for the Mid South Charles Bell, Consumers Union Jeanne Bell, CompassPoint Nonprofit Services The Nonprofit Quarterly is published by Nonprofit Information Networking Association, Jim East, George Kaiser Family Foundation 112 Water St., Ste. 400, Boston, MA 02109; 617-227-4624. Chao Guo, University of Pennsylvania Copy right © 2015. No part of this publication may be reprinted without permission. Anasuya Sengupta, Activist/Strategist/Facilitator ISSN 1934-6050 Richard Shaw, Youth Villages

Welcome executive puBlisher Joel Toner editor iN chief Ruth McCambridge NatioNal correspoNdeNt ear readers, Rick Cohen This edition of the Nonprofit Quarterly is seNior maNagiNg editor about the dynamics and experience of bring- Cassandra Heliczer coNtriButiNg editors Ding something—an organization, a field, even Fredrik O. Andersson, Jeanne Bell, a city—back from a precipice. In some cases, the enti- Chao Guo, Jon Pratt ties have only barely been walked back from the cliff’s oNliNe editor commuNity Builder edge, and their positions are still unstable; in other Jason Schneiderman Shafaq Hasan cases, they have regained solid ground in a way that director of digital strategies has more traction, and have found a decisive direction. Aine Creedon In the organizational cases, there are any number graphic desigN of factors at play—both internal and external. We con- Kate Canfield productioN tinue to find remarkable the number of nonprofits that were caught midway through Nita Cote capital-intensive projects that they could not complete during the recession. These marketiNg coordiNator kinds of situations were sometimes accidents of timing rather than the result of a Amanda Nelson lack of due diligence. Projections and plans that were well thought through and operatioNs maNager might have worked any other time not only did not work but opened up holes in Scarlet Kim organizations through which assets fell. By definition, though, none of the cases in copy editors proofreader this edition have come to closure—yet. Elizabeth Smith, James Carroll Christine Clark In two cases, the institutions were rescued by stakeholders after the boards tried to close them down. In another case, a leadership transition from a founder group editorial advisory Board of nuns to a more secular team went awry. Relationships with funders, new forms of Elizabeth Castillo, University of San Diego organization, and many more components combine in these stories to provide much Eileen Cunniffe, Arts & Business Council of Greater fodder for reflection about organizations you may know and love. Philadelphia Lynn Eakin, Ontario Nonprofit Network But we have also looked at a couple of larger systems: a field (U.S. arts and culture Anne Eigeman, Anne Eigeman Consulting organizations) and a city (Detroit). The arts piece is a study of the degree to which a Robert Frady perfect storm can hit a large national field almost out of the blue, leaving wreckage Chao Guo, University of Pennsylvania in its wake. Still, within the individual organizations and subfields (for example, Rahsaan Harris, Emerging Practitioners in Philanthropy opera), doomsaying and the seeking of human feet at which to lay blame became Paul Hogan, John R. Oishei Foundation Mia Joiner-Moore, NeighborWorks America common behavior. The article on Detroit is by Rick Cohen, and its depth and detail Hildie Lipson, Maine Center for Public Interest are rich with lessons for those involved not only in complex municipal interventions Lindsay Louie, Hewlett Foundation but also in all of the smaller component parts of that. Rick passed away in November Robert Meiksins, Forward Steps Consulting LLC of this year, and we lovingly dedicate this edition to his memory—we will allow our Jon Pratt, Minnesota Council of Nonprofits tribute on page 3 to express what is in our hearts at this time. Jamie Smith, Young Nonprofit Professionals Network In all, this edition is a study in resilience and resourcefulness, albeit not achieved Michael Wyland, Sumption & Wyland without some measure of pain and crisis. In each case, somewhere along the way people could have given up and left it all behind—and, indeed, in some situations advertisiNg sales 617-227-4624, [email protected] that is the best course to take. But either way, we hope that the discussions within about how these entities not only survived but also found a new path along the way suBscriptioNs: Order by telephone (215-458-8557), fax (617-227-5270), e-mail ([email protected]), will inform and inspire. or online (www.nonprofitquarterly.org). A one-year subscription (4 issues) is $49. A single issue is $19.95. WINTER 2015 • WWW.NPQMAG.ORG THE NONPROFIT QUARTERLY 5

The Nonprofit Ethicist by Woods Bowman Situations that raise the conflict-of-interest specter may not always turn out to be illegal but do always raise ethical questions. When in doubt, follow IRS-recommended procedures, your own conflict-of-interest policy, and your gut—the three together should go a long way toward helping you to make the right decision. Editors’ note: Right before Woods Bowman passed away, in July 2015, he presented the Nonprofit Quarterly with a cache of Nonprofit Ethicist columns. This is the second of four batches that we are running in the Quarterly as his parting gift to us all. This quarter’s installment is on issues related to conflicts of interest. ear nonprofit ethicist, to sit on our executive committee has or committee meeting, but after the Is it appropriate for an execu- offered to head our efforts to increase presentation, he/she shall leave the tive director of a nonprofit our charitable gift annuity program. He meeting during the discussion of, and Dorganization to also serve as has a vast knowledge of the product and the vote on, the transaction or arrange- a board member of that organization? sees the effect that a strong gift annuity ment involving the possible conflict of Concerned program can have on our organization. interest. However, he has requested a commis- b. The chairperson of the governing Dear Concerned, sion for the gift annuities that he brings board or committee shall, if appropri- I don’t like it. This arrangement com- into the organization. Our current ate, appoint a disinterested person promises the ability of a board to hold bylaws and policies do not directly or committee to investigate alterna- an executive director accountable. It address this situation. What would your tives to the proposed transaction or is based on a for-profit model, where recommendation be in this situation? arrangement. board members are duty-bound to rep- Wondering c. After exercising due diligence, the resent stockholders. Because officers governing board or committee shall and directors of corporations are also Dear Wondering, determine whether the Organization stockholders, theoretically there is It always disturbs me when board can obtain with reasonable efforts a no problem with a CEO being a board members try to make money at their more advantageous transaction or member. However, a nonprofit’s board organization’s expense, although it is arrangement from a person or entity has a fiduciary duty to its beneficiaries. I legal (and can be ethical but frequently that would not give rise to a conflict believe that a healthy dialogue between isn’t). Never, ever employ a fundraiser on of interest. board and staff is the best way to discern commission; that arrangement breaches d. If a more advantageous transaction the best interests of the unrepresented the Association of Fundraising Profes- or arrangement is not reasonably beneficiaries. A nonprofit CEO sitting sionals Code of Ethical Standards. possible under circumstances not on his or her own board, in my opinion, Looking past the threshold issue, this producing a conflict of interest, the stifles give and take. In a spirit of collegi- is an obvious conflict-of-interest situa- governing board or committee shall ality, board members would tend to defer tion. The IRS recommends procedures determine by a majority vote of the to the CEO. I also suspect the practice for dealing with a conflict of interest (see disinterested directors whether tends to inflate executive compensation. Appendix A to IRS Form 1023). I will the transaction or arrangement is quote the key section: in the Organization’s best interest, and Dear Nonprofit Ethicist, a. An interested person may make a for its own benefit, and whether it is A local insurance agent who happens presentation at the governing board fair and reasonable. In conformity with • 6 THE NONPROFIT QUARTERLY WWW.NPQMAG.ORG WINTER 2015

the above determination it shall make one of the trustees ran successfully for Dear Uncertain, ethi its decision. selectman in the town. This trustee reviewed his plans in advance with the grant request is “not within our normal I worry about the statement that the c s Dear Nonprofit Ethicist, foundation, and all gave their blessing. range of grant requirements.” A host of As a philanthropic advisor, I am some- He will certainly recuse himself from activities might “greatly benefit” the com- times asked by clients for recommen- any votes involving grants to the town munity, but you cannot finance them all. dations of worthy nonprofits. In the for any purpose (something that the Follow your conflict-of-interest policy. area of disaster relief, I have often rec- foundation has supported in various If you don’t already have one in place, ommended a particular organization capacities regularly). For a relatively nothing you can do will be entirely satis- whose work and financials I am famil- small community, there is a surprising factory—either ethically or practically. iar with and can endorse. This organi- amount of political maneuvering that Get a conflict-of-interest policy before zation recently became a client of my has occurred at the selectman level. This the next problem arises. company. Does this present a conflict of trustee is an ideal candidate because he interest? If so, must it be disclosed to my brings integrity and professionalism to Dear Nonprofit Ethicist, company’s other clients? Does this need the role. Other than the clear responsi- If a cotrustee on a grantmaking account outweigh the need to keep client names bility of recusal from votes relating to is also a representative of a nonprofit confidential? Should I recommend a dif- the town, do you have any suggestions receiving funding, we can recognize ferent organization in the future? for ensuring that the foundation stays and employ conflict-of-interest strat- Advice Seeker above any political fray and avoids the egies, but conflict of interest will be appearance of conflicts of interest? inherent in the relationship, particu- Dear Advice Seeker, Worried larly if this is a long-serving cotrustee Yes, you have a conflict of interest. The and a key nonprofit organization. Are degree of conflict depends on how your Dear Worried, there best practices for cotrustees and company organizes its internal affairs, I defer to the IRS recommendations. Let fiduciaries to discuss in instances like with firewalls and the like. Conflicts are this individual make a presentation, but this (key discussions to have, bench- ubiquitous in modern society. The trick after speaking he should leave the room. marks and ratios to review/evaluate, is to manage them to achieve a fair result. Discussion of and the vote on the town’s procedures to implement)? Informed consent solves many ethical grant application should occur without What to Do dilemmas, so I recommend disclosure his presence. whenever possible, but I always recom- Dear What to Do, mend honesty. If you believe that Agency Dear Nonprofit Ethicist, You are right, a conflict of interest is X is the best, you should say so. If this is We are a grantmaking organization inherent in this scenario. There isn’t a done in the context of a board meeting, that issues grants for health-related pat solution that resolves the situation you should follow the IRS recommenda- organizations within our community. you describe. If you can, add one disin- tions and leave the room after speaking The father of one of our board members terested cotrustee (or more) so the con- while the others debate and vote. is on the board of a local healthcare non- flicted trustee can be outvoted if a grant profit, and has applied for a grant from is ill advised. In any case, be sure to treat Dear Nonprofit Ethicist, our organization. The grant request is similar organizations and similar grant My company serves as corporate not within our normal range of grant proposals evenhandedly. trustee with four individual trustees of requirements, but the project this grant a private foundation. The foundation would fund could greatly improve our Woods BoWman was professor emeritus was established by a couple, long since community. Our board member is of public service management at DePaul deceased, from a town that remains a pushing for us to grant this project, University in Chicago, Illinois. focus of the foundation’s giving, along but as it doesn’t meet our normal grant with the broader region. The individual requirements, and given the father-son To comment on this article, write to us at trustees must be residents of the town relationship, what would you recom- [email protected]. Order reprints from at the time of their appointment, and mend that we do in this case? http :/ / store .nonprofitquarterly .org, using all are active in civic affairs. Recently, Uncertain code 220401. WINTER 2015 • WWW.NPQMAG.ORG THE NONPROFIT QUARTERLY 7

Stakeholder ac tion Making the Most of Stakeholder Revolt: The Recapturing of the San Diego Opera and Sweet Briar College by Ruth McCambridge Now that organizational stakeholders have access to one another across boundaries that formerly would have kept them apart, opposition to a given leadership’s objective can be rallied. More and more, stakeholders are demanding transparency around organizations’ decision-making processes, and the standard insular board structure may well become something of the past. ver the past few years, NPQ has been • Both organizations had a relatively healthy tracking nonprofits whose stakehold- body of reserves and/or endowment; ers rose up to save them after their • Both had experienced some negative trending Oboards voted to close the doors. They in their revenues and revenue drivers; are in a larger field of organizations that have felt • Both were in fields where doomsayers were the sting of stakeholder rebellions when a board loudly lamenting the death of the genre—in has somehow broken faith with the community one case, same-sex colleges, and in the other, it serves. As we watched these situations where the opera; an institution is saved, we realized that two of • In both cases, decisions appear to have been them—Sweet Briar College and the San Diego made out of the blue, with little or no consulta- Opera (SDO)—were remarkably similar. At the tion with stakeholders; point the boards voted to close: • In both cases, the executive director/presi- dent left after a decision was made to save the Ruth mccamBRidge is the Nonprofit Quarterly’s editor organization; in chief. • In the case of the San Diego Opera, more than 8 THE NONPROFIT QUARTERLY “DEFIANCE” BY DANIEL HENSON/WWW.DANIELHENSON.IE/



half the board left, and in the case of Sweet and raise the money to continue the seasons as Briar College, the entire board was replaced; we had been planning them.” and But, as she described, “that willingness to • In both cases, stakeholder groups protest- follow the few was exactly what ended up creat- “Subsequent fractious ing the decision raised significant money to ing the chaotic near closure and then its rever- help retake and remake the organization, sal. At some point, a small number of people on emergency meetings but both face a creative challenge in seeking the board and in top management decided that called to persuade the sustainability. we should close rather than make the changes needed to survive. An emergency meeting was board to postpone The similarities between the two organiza- called with little notice and no information about tions’ trajectories from near closure to unex- closure and look for pected rebirth led us to take a closer look at what was to be discussed; it was here that the proposal to shut down was put on the table for options were going how the new boards have handled governance the first time—and convincingly, with the justi- in the context of an empowered network of nowhere. In a moment stakeholders. Four facets of the stories of these fication that operas were closing all around us.” two organizations emerged as particularly inter- According to Lazier, the institution’s leaders of insanity, I challenged stated that “the right thing to do was to pay off esting with respect to transformations of their debts and future obligations, and close our doors. the board with a million modes of governance and engagement with their stakeholders/networks: (1) the lead-up to the Death with dignity.” dollar gift.” Apparently blindsided by the force of the closures; (2) the donations, and their effect on argument, the whole board agreed to shut the the stakeholders/networks; (3) how governance company down within an hour of the proposal’s changed; and (4) how the networks became being made. “But within twenty-four hours,” said integrated into the organizations as they moved Lazier, “some of us began to think, What have we forward. done? It was like we had gone into mourning, the san Diego Opera and we were mourning the death of a loved one. The Lead-Up People were just kind of numb. We went from Carol Lazier, current chair of the San Diego understanding we had financial issues to, ‘We’re Opera’s board, was on the board but was not the going to close the company,’ within the blink of chair when the vote to close was made—and she an eye.” describes the SDO’s strange pivot from a position Meanwhile, said Lazier, “the community of privilege and prestige to a public declaration of was absolutely furious. We had a great opera imminent closure. company, a cultural jewel, and no one wanted to In some ways, what Lazier describes is an insti- lose it. We had people who didn’t even go to the tution that got a little lazy about charting its own opera who were fighting closure, saying, ‘This path forward during a time of economic and cul- is not right—this is owned by the public; this is tural tumult. The SDO was certainly not in trouble not owned by the small group of people on the artistically. “We had a wonderful opera—in the inside.’” top ten of opera companies,” she said. “We had The portion of the board who started to regret very strong staff leadership at the top, and we the decision began pushing for rescinding the had a very powerful fundraiser. But we also had vote to close—and a “Save the Opera” online a fund called the Kroc Fund, which we could just petition campaign was initiated by community dip into when we needed to. We weren’t lean, supporters. The opera staff and local unions were and we didn’t change our business model in time, fighting the closure, and the press was clearly supporting a reconsideration. and eventually we found ourselves running out of money. The board knew we would run out of funds in a year, but we were complacent. We had The Million-Dollar Gift and the Network these great people at the top, and we thought that As Lazier described it, “Subsequent fractious certainly they would pull the rabbit out of the hat emergency meetings called to persuade the • 10 THE NONPROFIT QUARTERLY WWW.NPQMAG.ORG WINTER 2015

dark woods. “What I had anticipated doing in fabric of the organization’s future. “There was a terms of programming was clearly in alignment group called the White Knights Committee that with what the board had already stated,” noted was sort of self-formed,” said Bennett, “and it Bennett. “What the board wanted to do to make included administrative staff, it included rep- Instead of trying to sure that the company was speaking more rel- resentatives from unions, and it included com- evantly to all of the community was produce all munity stakeholders—and they’re really what discern the will of the kinds of works of opera—so, many more things was the flame in the fire of community engage- board, Bennett has been that could be a fit under the umbrella of what we ment. And within my first couple of weeks, I met call ‘opera,’ and in a variety of venues; and both with a White Knights representative, who gave spending his time on of those things had never been done in San Diego. me notes on the committees’ thoughts and con- what he calls a “listening And, by attempting to do those two things, the cerns. And then I had a group meeting with the board wanted to reach all of the specific demo- committee, probably within a month and a half tour.” “One of the things graphic groups that are the subsets of the com- of my arrival—heads of the different groups that that was clear before munity of San Diego.” were represented within the White Knights. And, Instead of trying to discern the will of the as part of our strategic planning exercise, we’ve was that the company board, Bennett has been spending his time on been doing SWOT analyses with different data what he calls a “listening tour.” “One of the things points with our board and administrative staff, wasn’t very good at that was clear before was that the company wasn’t and with the various community stakeholders. listening to the very good at listening to the community. It was And we also did a SWOT analysis with the White good at telling the community about the value of Knights—again, just to try to get their input and community.“ the kind of opera it produced, but it wasn’t very data points.” good at listening to the community about why Bennett isn’t certain of the exact number opera was important to them. And, since the com- of people involved in the White Knights. “I met munity came forward so strongly and said that around fifteen or twenty, but I think it’s a much opera needs to be preserved, it’s key to me that we larger group, because it truly was a web made go out to the community and listen. So, instead of up of, say, an AGMA rep, and then a rep from the just throwing things against the wall to see if they stagehand union, and then one person from our stick, we’ll be able to test whether some of the costume shop. . . . These sorts of people were things that we’re planning really have resonance. coming together with three or five administrative And, from my experience of running a smaller staff—and then it just spread very quickly. So, I company in New York City, I’ve learned that a lot don’t know the total number. The group was very of the work that’s being done now—contemporary involved in the social media aspects of the crowd- work and chamber opera—speaks directly to spe- funding campaign, too. So, they feel like they are cific current issues, and also to smaller groups—a true stakeholders, like they have a voice. And it Latino community or the military community or is very important to me to make sure that we’re the LGBT community—and those are all subsets keeping them informed. But not just telling— of the larger San Diego community that we hope asking . . . telling and asking, telling and asking, to engage. So, by doing smaller-scale work in addi- going back and forth, really having a conversation tion to our large grand opera, we hope to have with them.” more resonance for these different demographic It appears that such networks are critical at groups, and become a stronger community asset the point of recovery—critical supports that for all of San Diego.” have to be developed in a new way. For instance, explained Bennett, the opera has long had a The Network Is Pulled Through donor group called advisory directors—people As Lazier mentioned, there was much external that give at a certain level and above. But now support from other organizations, as well, and the SDO is considering how to approach them the threads of this network of individuals and differently: “I think we may wind up expanding organizations have to be pulled through into the that group and thinking about it more, because • 12 THE NONPROFIT QUARTERLY WWW.NPQMAG.ORG WINTER 2015

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