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“The Governing Board Faces Rebellion in the Ranks” Case Study

By analyzing the case described by Widmer (1995), one can conclude that the problems of Community Opportunities Inc., or COI, were not unexpected and resulted from a long period of incompetent management. This non-profit organization is a socially significant enterprise that provides assistance to people with disabilities, and the funds earned by it are spent on the needs of the members involved. In addition, when evaluating the growth rates of COI, one can note that in recent years, its profits have been growing slowly but steadily. With a clear management structure divided into the board of directors and administrative staff, COI is able to make decisions based on the assessment of reports received from different departments. Moreover, each of the administrators has been working in the organization for a long time and is well aware of the nuances to take into account. Therefore, at first glance, this non-profit organization conducts socially significant activities and makes enough efforts to ensure sustainable growth.

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However, a closer assessment of COI makes it possible to identify significant gaps in the company’s work, including both managerial and operational issues. Firstly, while estimating not only revenues but also expenditures, one can notice that in recent years, a budget deficit has been observed. Previously, COI accumulated profits, which allowed it to use funds for development purposes, but in 1993 and 1994, a negative balance indicates ineffective financial management practices. This factor is one of the biggest concerns for Jane Armstrong, the board’s chair.

Secondly, while looking at the administrative structure of COI, one can notice that a number of positions are vacant, which, in turn, is not evidence of effective personnel management. Several associate directors, director development, and director day treatment services are vacant. Given that the organization is experiencing severe financial difficulties, effective control by all departments without exception would be a significant factor that could strengthen the work of COI if implemented correctly. However, Armstrong is concerned that administrative departments do not have sufficient resources to analyze and evaluate adequate solutions to reinforce the weak aspects of the company’s activities.

Finally, massive staff departures are the crisis factor that testifies to a weak corporate culture in COI. The non-profit organization pursues high goals and socially significant objectives, which are to help people with developmental disabilities. A massive petition demanding a review of the company’s management principles and bringing to justice those responsible for the current gaps and losses is indicative of the staff members’ dissatisfaction with the current management. Such a result, in turn, speaks of inconsistency between leaders and subordinates and reflects a distrust of the management team since the petition is sent directly to the board’s chair. Therefore, the massive leak of valuable specialists is the factor that worries Armstrong and is a critical reason to revise the existing principles of management and interaction with personnel.

These weaknesses are serious and need to be addressed because without effective control and agreement among colleagues, the crisis is likely to worsen. Valuable professionals may leave their positions, and leaders will have to recruit new employees who, due to the lack of experience in the field, may not live up to expectations. As a result, when summing up the problems of the organization, one can highlight the following challenges that form the basis of the COI’s case:

  • Financial issues.
  • Inadequate personnel management.
  • Staff departures.

These issues are caused by inadequate management policies promoted in COI. The HR area is a weak aspect, and the performance of the executive director, who ignores the departure of qualified professionals and encourages the hiring of young employees, raises questions from subordinates. The board of directors might not have paid particular attention to the current gaps, and chalked it up to a temporary crisis. However, the collective letter, signed by more than 90% of experienced employees, is an occasion to investigate the situation in COI and study the causes of the difficulties. Among the problems to address, one can highlight the unreasonable personnel management policy in the non-profit organization in question and the executive director’s indifference to pressing issues. These weaknesses prompted COI employees to act behind the back of the executive and turn to the board of directors, who, in turn, cannot ignore such a complaint.

In addition, despite the leadership qualities of Eric Meyer, the executive director, his financial management skills leave much to be desired. The aforementioned budget gaps prove that Meyer’s efforts to build a positive COI image through engagement with local authorities and policymakers do not have a positive impact on the organization’s assets. His reports, in which he describes the results of financial activities, have little to do with reality, which ultimately resulted in a budget deficit. Armstrong, as a chair, has faced a daunting challenge since ignoring the petition from colleagues is unacceptable, and firing the executive director, in turn, is complicated by bureaucratic restraints and conventions. As a result, the need to resolve the current crisis through the right steps forms the basis of the dilemma that Armstrong has faced.

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In this case, the chair has several options for acting, and each of them can have individual implications on both the management structure and the organization as a whole. For instance, the first thing Armstrong can do is initiate the process of firing Meyer and start work on appointing a new executive director. Overall, the chair is unlikely to leave the colleague’s petition unaddressed, but alternatively, she can resolve the issue without imposing harsh sanctions on Meyer. On the other hand, in case Armstrong does not comply with COI employees’ requirements, she risks her authority and subordinates’ trust. People in the organization expect that management will take effective steps to resolve the current financial and personnel crisis, but if no adequate response follows, this will prove the incompetence of those in charge.

The optimal outcome, in this case, is Meyer’s quick resignation. However, given his contact with the authorities and numerous bureaucratic constraints to follow, the board of directors will need to work hard to prove that COI no longer needs the services of its current executive director. One of the most undesirable results of such an initiative is due diligence by supervisors. As a non-profit organization, COI deals with high accountability to the relevant agencies. For Meyer, accusatory actions by the company may be seen as an excuse to unlawfully remove him, and he may endeavor to damage COI’s reputation as a last resort by any means. Such an outcome is unlikely, but this is crucial to consider all possible options to anticipate the resolution of the crisis.

Another option for Armstrong to act is to possibly try to resolve differences with employees directly, without involving the entire board of directors. If the professional specialists who have signed the petition agree to a productive dialogue, this can help to come to an optimal solution together and identify convenient ways out of the crisis. In addition, real feedback from management work will be received, and the main subordinates’ concerns will be voiced. Nonetheless, if colleagues do not agree to a dialogue, the outcome of such a decision will be unpleasant for Armstrong. Subordinates will probably suspect her of weakness and an attempt to keep silent about the real problems of the organization. The authority of the chair will be damaged, and subsequently, she will still have to account to other representatives of the management for her silence. Such an outcome is highly undesirable, and productive dialogue is a much more valuable prospect.

Finally, Armstrong can discuss the crisis with Meyer directly and explain to him that employees, including experienced professionals, are unhappy with the current state of affairs in the organization. Due to the executive director’s high communication skills, he can understand staff grievances. In particular, he should be aware of the dissatisfaction of his subordinates with the current personnel conditions and financial challenges. However, while open to dialogue, Meyer may misunderstand the issue and accuse Armstrong of trying to turn the organization’s staff against him. In addition, he may tighten the measures of interaction with subordinates, being angry at their initiative to make adjustments to the work process. Such an outcome is undesirable for neither the employees nor Armstrong since both sides could suffer from the executive director’s revenge.

As a result, the most reasonable recommendation for the chair is to bring the issue up to the board of directors and provide all complaints raised in the petition signed by COI staff to the administrators. The board, in turn, needs to hold a meeting and determine the extent of Meyer’s responsibility and his guilt in the issues identified in the complaint. Having analyzed the results of COI during the period of Meyer’s leadership, the board should review the powers of the executive director and, proving his real guilt, offer him to resign voluntarily. As evidence, the financial results of COI should be provided, as well as the poor indicators of personnel policy. Armstrong, in turn, should make sure that the identity of those who have signed the petition are not disclosed to prevent further harassment by the former leader.

The board should understand that over the life of the COI, the supervisory body’s efforts to oversee the company’s activities have proven ineffective, and changes in management policy are desirable. Moreover, according to the organization’s charter, the board oversees the executive director’s activities, and the omissions of senior management are evident. Ineffective management also manifests itself in the lack of initiatives to optimize the weak aspects of COI’s work. In Figure 1, the gaps allowed by the board of directors are summarized based on the official responsibilities of the body and its functions within the organization.

The board of directors’ omissions
Fig. 1. The board of directors’ omissions.

In this situation, the most appropriate decision for the board is to review the petition and not emphasize that it was drafted and submitted without the knowledge of the executive director. The employee’s complaint is a serious argument for conducting an appropriate internal investigation and drawing up an action plan to overcome the crisis. Armstrong, who expects COI to cope with the current challenges, needs to convey to the board that her subordinates’ claims are not unfounded, and specific performance results should be provided as evidence. The involvement of Meyer is also mandatory, but his role in considering the complaint and making concrete steps cannot be decisive. Based on the outcomes of the assessment, either relevant instructions can be given to the executive director, or he can be offered to resign. The latter option is more desirable as Meyer has already had a chance to prove his professional suitability. Appointing a new director can help optimize COI’s performance and address the current problems more efficiently.

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For COI, such an outcome will be favorable since both employees and the target audience of the non-profit organization will be able to feel real changes after making appropriate adjustments to the operating mode. Personnel policy needs to be improved, and the professionalism of subordinates should be valued but not the desire to attract young employees. In the context of financial asset management, the organization can revise the existing cost categories and draw conclusions from unsuccessful decisions. COI’s workforce includes a range of highly experienced and qualified professionals, and encouraging their commitment can have a positive impact on the organization’s performance outcomes. In the absence of market competition and non-commercial activities, the proposed measures may have a beneficial effect on operating results. Therefore, engaging the board of directors and discussing the signed petition at the general meeting is a must to make to avoid aggravating the problems.

Reference

Widmer, C. (1995). The governing board faces rebellion in the ranks. In M. Wood (Ed.), Nonprofit boards and leadership: Cases on governance, change and board-staff dynamics (pp. 139-147). Jossey-Bass.

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