Whopper Mistakes Can Unravel Your Ministry

If stupidity got us into this mess, then why can’t it get us out.

 

by Dan Busby and John Pearson

 

We cannot solve our problems with
the same thinking we used when we created them.

 

The board was at the precipice—one of those moments that board members pray will not occur during their board terms.

The ministry had experienced four consecutive years of million-dollar-plus excesses of expenses over revenues. The CEO had failed to control expenses. At the same time, revenues had rapidly declined.

The deficits had pushed the unrestricted net assets (other than net property, plant, and equipment) into a deficit position. In desperation, the board authorized the use of $2 million in giver-restricted gifts to meet operating expenses. Two major givers, upon learning that their gifts had been misdirected, sued the ministry.

Three days before the board meeting—in the wake of all of these events—the ministry’s CEO submitted his resignation. And did we mention: the board had not conducted a CEO annual performance review in many years.

It was a somber board meeting. There was considerable casting of blame. The roof seemed to be caving in with no way out. The board prayed, but their prayers did not seem to rise above the ceiling.

The board was on the verge of becoming unraveled. You know, when we pull on a thread—and pull and pull—it unweaves what came before.

When a board becomes unraveled, it comes unwound, rapidly splitting apart like separating threads. Too often, a ministry slowly and imperceptibly unravels for several years before the board wakes up to the reality. Max De Pree said it best: “The first responsibility of a leader is to define reality.”[1]

Board stupidity—it sounds so cruel, yet it is so accurate—had gotten this ministry into their mess. But the same stupidity would not get them out.

The board had made some whopper mistakes:

  • Whopper Mistake #1: Failure to give oversight to the finances in general. As the deficits began to accumulate, the board did not make the necessary cuts early or deeply enough to offset the financial bleeding. Their actions trailed what was happening instead of getting in front of it.
  • Whopper Mistake #2: Failure to require accountability from the CEO for balancing the budget. The board did not call the CEO’s leadership into question as the deficits began to pile up. Instead of changing CEOs, they tried to cover up the problems and hope that everything would turn around.
  • Whopper Mistake #3: Failure to provide accountability for restricted gifts. Borrowing $2 million of restricted funds for operations was the crowning blow. That one act reflected the height of board irresponsibility.

Should the board have just elected a new CEO and moved on? Hardly. It was time to discern God’s direction while getting to the bottom of everything that went wrong. Sometimes this may require retaining a consultant to bring fresh eyes, expertise, and hope to the ministry.

What should a board in a situation like this address immediately? Start with four commitments that all reflect foundational issues:

  • Commitment #1: Conduct CEO annual reviews. The board let its guard down—and let the CEO down—by failing to conduct a CEO annual performance review. It must commit to do this in the future with its new CEO.
  • Commitment #2: Assess revenue projections. Why were revenues rapidly decreasing? Has the bleeding stopped, or is there more to come? What is a realistic view of anticipated resources for the next year? Is it time for a more conservative approach in projecting revenues? Is the organizational mission still relevant?
  • Commitment #3: Reduce expenses and address sustainability. How deep must expenses be cut and in what areas? Is the organization sustainable—even with deep cuts? Is it time to consider merging with another ministry?
  • Commitment #4: Restore restricted gift balances. The board must develop a strategy to replace the restricted resources that were inappropriately expended for operational purposes. This should be accomplished in the shortest reasonable time. The board should also adopt a policy of not using restricted gift funds for purposes other than those that the givers intended.

Once these issues are addressed, then it is time to consider who is qualified to lead a turn-around of this ministry. Not every successful leader is skilled in turnarounds, according to Michael Watkins.[2]

When a ministry becomes unraveled, it is not time for rash action. It is time to step back and review how it happened, determine corrective steps, and move ahead—all with the help of the Almighty.

 

BOARDROOM LESSON
_______________________________

If your ministry becomes unraveled, it likely did not happen quickly.
Correcting the problems will take time and God’s help.
You must identify the whopper mistakes
and make immediate course correction commitments.

  Board Action Steps:

  1. Lament: On the worst day of your board’s life, take time to seek God’s help.

  2. Learn: Determine the lessons to be learned from the ministry’s challenging experiences.

  3. Legislate: Take corrective action, including policy revisions, to ensure that there is no repeat of the past.

 

Prayer

Lord, help us to look to You for guidance both in the good times
and when life unravels. Amen.

 

 

[1] Max De Pree, Leadership Is an Art (New York: Random House, 2014), 11.

[2] Michael Watkins, The First 90 Days: Critical Success Strategies for New Leaders at All Levels (Boston: Harvard Business School Press, 2003), 61. Note: Board members must discern not only what CEO competencies they need in a CEO for the future, but what kind of situation their new leader will inherit—and whether the candidate has relevant experience. The author’s “STARS” model describes four broad types of organizational situations: Start-up, Turn-Around, Realignment, and Sustaining Success.
 

From More Lessons From the Nonprofit Boardroom: Effectiveness, Excellence, Elephants!, 2019, www.ECFA.org/KnowledgeCenter.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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