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Workers compensation claims rising and associated costs: Dysfunctional organizations often experience an increase in workers compensation claims for emotional stress, repetitive stress injuries, or back injuries These conditions are more difficult to prove, and often more expensive to treat because of the imprecise aspects of the injury An insurance professional was asked by a client to review the alarming increase in repetitive stress and emotional stress claims Upon interviewing the claimants, the insurance executive concluded that ergonomics wasn t the issue, but the client s dysfunctional management style was The employees did whatever they could to stay out of the office HR costs absences, sick days, lower productivity: As was noted in the previous story, a dysfunctional environment will result in more absences, sick days, workers compensation claims, and, ultimately, lower productivity Staff retention is lower, which will, in turn, increase the costs of recruitment, hiring, and training Technology: Misuse of technology is common in dysfunctional organizations Staff surf the Net instead of working, download files and programs that can transmit viruses, and pave the way for hacker break-ins Difficulty in attracting donations, capital, or funding: Organizational dysfunction has a way of making the nonprofit less attractive to sources of capital, major gifts, and grants Banks, foundations, and major donors all expect the nonprofit to be able to present a professional profile in terms of governance, internal controls, and legal compliance Several prominent philanthropists declined to give major gifts to a large nonprofit primarily because they observed that the nonprofit s chief executive and its board failed to ensure that the organization managed its money in a proficient manner The executive had been promoted because of his scholarly accomplishments, rather than any business acumen, and board members were chosen primarily on the basis of their philanthropic capacity This deficiency in the executive s skill set and the board s benign disinterest had a trickle-down effect within the nonprofit s staff Difficulty in attracting board talent, collaborative ventures, and corporate partnerships: One of the most common mantras among dysfunctional organizations is that if they demand performance, they will never be able to recruit board members Just the opposite! People of quality generally refuse to join the governance entities of dysfunctional organizations because their skills will either be ignored or wasted Although no organization is perfect (ie, without any form of dysfunction), it is important to understand the type and source of dysfunction within your own nonprofit and its impact on the financial well-being of the organization as well as on the nonprofit s standing in the community (see Exhibits 33 and 34)
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3
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Anatomy of a Dysfunctional Nonprofit
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exhibit 33
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costs of dysfunction
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What Are the Costs of Dysfunction in Your Nonprofit Decision-making Are decisions delayed or stymied by endless discussion, committee meetings, or other methods Are there metrics in place to establish objectives before making a decision Are the appropriate players involved in the discussion If the discussion only entails lowerlevel staff who have no authority to make a decision, the process is dysfunctional How are the relevant facts and data gathered prior to making a decision How are decisions evaluated Is there a mechanism for reviewing important decisions to determine if a course correction is needed Insurance premiums and availability Has the nonprofit experienced difficulty obtaining insurance at the appropriate limits for a competitive price Has the nonprofit experienced a large number of claims Major claims Claims in one particular area Are supervisors held accountable for the frequency and severity of on-the-job injuries Has the nonprofit s workers comp experience modification increased in the past three (3) years Difficulty in attracting major donors, grants, and other sources of capital Has your nonprofit had difficulty in securing major gifts from donors If so, what reasons have the donors given for declining to give a major gift Has your nonprofit been turned down for grants or other project-related funding Has your nonprofit had difficulty obtaining a line of credit, mortgage, or other loan products Regulators Has your nonprofit received inquiries from the Internal Revenue Service and/or any state or federal regulators about your operations Has your nonprofit been named in any complaints to governmental agencies
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