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Developing a strong board is one of the most important actions an organization—
for-profit or nonprofit—will undertake. The recent release of “The
Dynamic Board: Lessons from High-Performing Nonprofits” (see
related story in this issue) by the Nonprofit Practice of McKinsey &
Company, who serve as advisors to VPP’s board, only reinforces my
own board experiences and further confirms the strong focus we encourage
our investment partners to place on board development.
Like other aspects of organizational development, board development is
something that the leadership of an organization learns and comes to appreciate
more over time. I know it was not something I understood or fully appreciated
initially, but, as a result of mentorship and great advisors, I came to
recognize its benefit. I was fortunate in my business career that the
organizations I co-founded were blessed (eventually) with great boards,
and I have also had the good fortune to serve on other boards I considered
highly effective. To keep this in perspective, however, I’ve learned
some of these principles the hard way, as well as by sitting on a few
boards that could have written the book on “how not to build and
run a board.”
My most significant lessons came when the firm I co-founded merged to
create Legent Corporation. The most effective thing we did as part of
the merger was put in place a very strong board. I can honestly say that
it was the board’s experience, sage advice, and counseling that
allowed the business to overcome the conflicts and challenges inherent
in the organizational consolidation we experienced and allowed the organization
to heal and to succeed. We recruited proven executives for the board who
had built large software and services businesses of the size and scale
we hoped to achieve—individuals who had “been there, done
that,” who we could learn from. I can’t emphasize strongly
enough our naiveté—not only in terms of how much we learned
and benefited from their input and advice, but also in terms of the appreciation
we developed for just how much we didn’t know about managing the
new, larger firm. And, from time to time, we augmented the board to add
relevant expertise, giving us added credibility and opening new doors
in fields where we were expanding—and the influence and advice of
our board proved to be invaluable.
Since entering the nonprofit world in 1993, I’ve seen nothing that
has dissuaded me from my belief in the importance of building and developing
a very strong board of directors. To the contrary, my experience strongly
suggests that one of the greatest opportunities for most nonprofits as
they consider their future is taking the bold steps necessary to build
a board that will help them achieve their strategic and longer-term needs.
When VPP enters an investment partnership, we do so with the understanding
that our work is to support the leadership to strengthen and grow their
organization. This work must start at the top of the organization, and
we do all we can to encourage our partners to strengthen their senior
management team and board. We believe it critical for an organization
to focus on having 1) the right executive leadership for the stage of
the organization’s growth and for the three-to-five-year challenges
ahead; and 2) a strong board that will support and challenge that leadership,
hold it accountable for promised performance, and ensure organizational
governance. If these elements are right, then much of what needs to be
done will be done well. If the leadership and board are not in place and
effective, then everything else the organization undertakes will prove
much more challenging as a consequence.
Here are some lessons learned on developing strong boards from our experiences
in the for-profit and nonprofit sectors.
- Good boards govern and insist on accountability.
For a board to function effectively and live up to its fiduciary responsibilities,
it must transcend the traditional role of some nonprofit boards that
focus only on raising money and, candidly, providing “rubber stamp
governance.” In some of my early nonprofit board experiences,
I was stunned by how little information was provided on budgets, forecasted
funding, strategic issues, and important operational matters. The boards’
attitudes often were akin to passive, reluctant oversight—along
the lines of “he/she is the founder and has built the organization
and we sort of do what he/she wants.” In my previous life as a
CEO, I grew the most, and the organization benefited the most, when
we built a board that ensured strong governance, provided sage counsel
and advice, and held me and our management team accountable for our
performance. Shouldn’t such strong governance and accountability
be desired, if not mandatory, when the interests of children and families
are at stake?
- At some point, the board can no longer be simply be “the
executive director’s board.” One of the most important
transitions an organization must go through is the conversion from the
board of “family and friends” to one that will provide governance,
objectivity, and accountability. This is an enormous, and often traumatic,
step for any organization, no matter the sector. A sign of organizational
strength and maturity is when the board has established its independence
(relatively speaking) from the executive director and has its own leadership
in its board chair. Although the views and inputs of the executive director
are important, the board must function with some independence in selecting
new board members, organizing committees, and setting guidelines for
the organization.
- Board seats should be filled according to needs, not personalities.
A board must determine what is needed in terms of skill, experience,
influence, and contacts to help the organization achieve its mission.
And, boards must always be forward-looking, recruiting the members who
will best help the organization get where it wants to go—even
if it means transitioning board membership. All too often, people are
recruited to the board because the executive director knows and is comfortable
with them. This type of informal board recruitment may work well in
the emerging years, but over time it often ends up cheating the organization.
Instead, we urge organizations to identify their board needs based on
their plans for the future and then recruit accordingly. Most executive
directors dream of having high-profile names on their board, but savvy
boards look for the right person with the skills and expertise that
best fits their needs, not simply the right name.
- Chemistry is critical. The relationships within the
board and between the executive director and the board are absolutely
critical to the board’s effectiveness, the organization’s
development, and the executive director’s performance and growth.
Even now, years later, I still call members of the Legent board for
advice and counsel because of the strong chemistry that developed—built
on mutual respect and the trust that comes from going through challenges
together. Certainly, VPP investor Raul Fernandez built the same kind
of relationship for his firm, Proxicom, where I, along with VPP investors
Jack Davies and Ted Leonsis, was privileged to serve on the board. Boards
can, and will, have differences of opinion. Such constructive conflict
is essential, but continual dysfunction or perpetual conflict is unhealthy.
I remember one for-profit firm that had developed some groundbreaking
technology but because its board was so dysfunctional and constantly
at odds with each other and the CEO, the company was doomed.
- The best board members will know the organization and the
“market.” For a board to be effective, board members
must understand what the organization does and the environment in which
it functions. Achieving this knowledge requires two things: Members
already have direct, first-hand knowledge of the area in which the organization
functions or they are willing to learn. And, second, it requires an
executive director and board chair willing to invest the time to “educate”
the board. This often entails providing background or research information,
arranging site visits, or organizing extra materials. It is, indeed,
an investment of time and effort, but one that pays off in the long
run. It's a shame to watch board members give great advice that is counter
to what is needed because they don't understand the basics of the organization
and its mission. It’s also important to have somebody who represents
an organization’s constituency—in my other life, the marketplace—on
the board. They always bring a grounded practicality, and can leverage
their own network and community. For example, if an organization deals
with immigrants, it may be important to have expertise from the immigration
service, or if an organization deals with health care, to have executive
expertise from a partnering hospital.
- Board members challenge the organization’s thinking.
Great board members push the leadership of an organization
to grow and develop. As a successful leader, it’s sometimes tempting
to drink your own Kool-Aid. Positive publicity or recognition for the
organization may even lead you to think you are better than you really
are. A strong board helps keeps leadership perspective in its proper
place. A good board asks tough questions and helps management maintain
focus. It should not blindly accept plans, but instead ask “How
are you going to get from here to there?”
- Board members see value by being on the board. Most
of us pay a lot of attention to how a board member can help an organization,
but joining a board should also be intellectually stimulating and rewarding
for the individual. Most people want to learn, so, whether it’s
keeping in touch with the market or some other goal, board members need
to derive benefit from their stint on a board. Members also need to
be engaged and this can be done through board committees, ad-hoc working
groups, or simply reaching out to involve them in particular initiatives,
using their advice and counsel as a way to show them value and respect.
They will quickly discern whether and how you're using their expertise.
They don’t necessarily expect their input to be used or accepted
all the time, but they do expect it to be heard and factored into decisions.
We urge organizations and their stakeholders to give board development
much more attention and hold themselves accountable for this critical
need. The McKinsey report suggests three strategic roles for boards:
- Shape direction through mission, strategy, and key policies;
- Ensure that leadership, resources, and finances are commensurate with
vision; and
- Monitor performance and ensure prompt corrective action when needed.
Executive directors, board chairs, funders, and strategic partners alike
should ask how well the organization has recruited and assembled the requisite
skills, experience, and influence to fulfill these three strategic roles
with independence, relevant competence, and integrity.
Finally, never forget: The board member's responsibility is a
fiduciary one, not solely to the executive director, but to the organization
and its stakeholders. I remember once during a merger, my counterpart
forgot that tenet. He appointed a person to the board expecting, when
push came to shove, the member would vote his way. Finally, the board
member simply said, "Young man, I have a fiduciary responsibility
to uphold.” It was over. No matter how close, no matter what kind
of friend, a board member has to do what is right for the stakeholders—and
that’s exactly what you want.
- Mario Morino
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One of the challenges that many nonprofits will face is the issue of leadership
transition. VPP investment partner Heads
Up is currently navigating the process, as co-founder Darin McKeever
transitions to his new post as executive director. Co-founder and former
executive director Vin Pan served as an advisor to Heads Up during this
past quarter to ensure that the change occurred as seamlessly as possible.
Darin is largely responsible for creating and implementing Heads Up’s
original program design for tutoring and mentoring elementary school students.
During the organization’s start-up phase, he managed all finance
and administrative functions, including office administration, information
technology, and human resources. He managed the organization’s annual
budget, which grew from $150,000 to $2 million between 1996 and 2002,
and also led an effort to increase Heads Up’s visibility and gain
greater public support through targeted outreach and improved print and
online marketing materials.
Fred Bollerer, VPP partner and Heads Up board member, said, “We’re
fortunate to have had two very strong leaders at Heads Up. Vin’s
energy and strategic thinking will be missed, but, because they worked
so closely together, Darin has taken over very smoothly.”
What’s up next for Vin? In a recent email, he said, “In 2004,
I will be pursuing old and new endeavors. That means ongoing volunteer
work with several DC community groups, some writing that may or may not
amount to anything, travel to at least Iowa and New Hampshire to help
Howard Dean's presidential campaign, and a fellowship-enabled trip to
Europe to study how different countries address similar social problems.
I am also planning an extended stay in Beijing though details about that
need ironing out.“
Vin will continue his involvement with Heads Up as a volunteer and board
member. He may be reached at vpan@headsup-dc.org.
Congratulations to Darin as he leads Heads Up to achieve its aspirations
and best wishes to Vin as he pursues this next phase of his journey.
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Ted Leonsis, the evangelizing vice chairman America Online (AOL) and
president of AOL’s Core Service, writes a lot of email. In the pre-dawn
hours and late at night he reaches out electronically to tens of thousands
of hockey fans, employees, colleagues, and a few special friends that
he has mentored for years. Much of Ted Leonsis’ personal and business
fortunes are tied to the new medium that he helped to build. It is through
a few of those new media relationships that he became an early investor
in VPP.
Ted, the only child of a Greek immigrant father, grew up in Lowell, MA
where his grandparents were mill workers, and later in Brooklyn, NY where
his father waited tables and his mother was a secretary. When his parents
moved back to Massachusetts, Ted zipped through high school, entered the
University of Massachusetts, and later transferred to Georgetown University,
where he finished first in his class. He went back to Lowell to work at
Wang Laboratories. At age 25, he moved to Florida and began publishing
LIST (Leonsis Index to Software Technology.) Just two years later, he
sold the company for $40 million. A few years later, he bought back part
of his enterprise and turned it into Redgate Communications, which developed
shopping catalogs on CD ROM. Around that time, he also ran for public
office, serving a term as mayor of the small town of Orchid, FL. That’s
also when he met and married his wife, Lynn. In 1993, Ted sold Redgate
to the upstart AOL and has been with the company ever since. In fact,
in terms of longevity with the company today, Ted is number 22.
Leonsis, 47, described by Washingtonian Magazine as “one
cool dude,” is a public relations director’s dream. His words
are measured and thoughtful, but he is also passionate, personable, and
can tell a good story. He likens AOL and his Washington Capitals to Greek
tragedies and biblical epics like David and Goliath. First there’s
the young upstart who appears out of nowhere and soars to success, only
to crash to earth because of bad decisions or acts of God. But then there’s
redemption and the glorious comeback. It’s the comeback that Ted
is trying to lead today. He believes that it is his job to remind customers
and employees of the strength of the AOL brand, which “is synonymous
with the Internet...I feel very responsible and committed to the employees
and partners of AOL. I love this company and I love this medium.”
He also loves his Washington Capitals, the 30-year-old hockey team that
he bought in 1999. As booster-in-chief, Ted has brought to the team some
of the same marketing magic that he used successfully at AOL. Since Ted
purchased the Caps, the number of season ticket holders has increased
from 2,900 to more than 10,000. He also makes sure that he and the players
are accessible to the public. Good intentions notwithstanding, this has
been a tough year for the team, but he has high hopes that the new head
coach, Glen Hanlon, can turn things around.
When Ted decided to buy the Caps, he founded Lincoln Holdings, LLC, a
partnership that includes several other VPP investors, Raul Fernandez,
Josh Freeman, Jeong Kim, Jack Davies, and Rick Kay. Ted is the majority
owner of Lincoln Holdings, which owns 100 percent of the Caps as well
as a 45 percent interest in Washington Sports and Entertainment, the holding
company for properties including the Washington Wizards, the Mystics,
the local TicketMaster franchise, and the MCI Arena.
Ted says that owning a sports team was an important item on his famous
list “101 Things To Do Before I Die.” He created the list
at the tender age of 25 after a frightening episode on a malfunctioning
airplane. The list has become the Leonsis strategic plan of sorts. (A
quick scan of his modest and impeccably neat office tells you that this
is a man who likes order and structure.) He has worked his way through
70 percent of the list so far—including a recent golf trip to Augusta
with Jeong Kim and other partners, and a movie credit for helping with
the production of a new documentary film, Capturing the Friedmans.
Purchasing the Caps was also a vehicle for other Leonsis passions—community
and charity. “Universities and sports teams are the most enduring
parts of the community…it’s also a great vehicle to give back
to the community,” he says. In addition to his personal touch with
fans, Lincoln Holdings has given away millions of dollars in Caps tickets
and other small acts of kindness to local charities and regular people
who needed a helping hand. He and his wife are making sure that son Zach
and daughter Elle are also beginning to learn to give of themselves.
“This is where I’m a little different in my charity work.
I write checks, but I tend to get personally involved,” says Ted.
He uses the accessibility of email to create communities as well as intimate
bonds. A few years ago he created e-Buddies,
which forges email relationships between caring adults and people with
intellectual disabilities. Ted has been exchanging daily messages with
Ken Holden, his e-buddy in Florida, for four years. Similarly, after becoming
a major supporter of Hoop Dreams Scholarship Fund in Washington, DC, Ted
befriended Michael Hendrickson. “We have communicated every single
day since he was a junior in high school. Now he’s a junior at Hampton
University, Ted says, smiling. “He’s on the Dean’s List
this year, and that’s a big breakthrough…He’s come out
of his shell and realizes that the playing field is level…that with
discipline and focus, you can excel.”
Earlier this year, Ted and some friends from his old neighborhood in
Brooklyn decided to invest in the renovation and reopening of the school
at Our Lady of Perpetual Help Catholic Church to recreate the Sunset Park
Youth Center where Ted played basketball as a kid. The club opened a few
weeks ago and is already serving 300 youngsters.
Ted says that touching people—fans, students, kids—is what
motivates him. “I like these people. It’s not work. I see
how they enrich my life and how their lives are [enriched] too.”
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When John Sidgmore passed away on December 11, newspapers from New York
to Seattle, Miami to Chicago, and Australia to Glasgow ran stories that
chronicled John’s professional life.
Even though he was well-known, both in our region and broadly in the
Internet and telecommunication industries, he never got caught up in himself.
As VPP investor Peter Barris, a close friend of John’s for more
than 20 years, said in a story in Private Equity Week, "John
was a strategic thinker, an articulate guy, who became an Internet rock
star, but he never let it get to his head."
John was a good friend to many of us, and a person who by his accomplishments
and leadership did much to advance the National Capital Region. More than
anything, John was John. He was grounded and he cared.
John was one of the early founding investors of VPP, and he was always
there when we reached out to him for help with VPP or some of our earlier
initiatives within the Morino Institute. In June of 2003, we had a mega-event
to celebrate the successes of the Netpreneur program and to bring together
some of the region’s leading business figures to talk about critical
lessons learned over the years. The evening’s panel was a “who’s
who” of the Internet/telecom world, and, of course, included John.
The panelists talked about business, but, more importantly, they talked
about helping others and giving back.
An excerpt from John’s remarks:
“I was asked to kick around some ideas about how people succeed
in these unusual times…Mentoring is very, very important to success.
Most of my mentors over the last 15 years have been young guys. In fact,
I don't really know any old guys anymore in our industry. Well, maybe
Mario [Laughing]… .My mentors have tended to be Russ Ramsey, and
Lawrence Calcano from Goldman Sachs, and Peter Barris, who I think is
here tonight, although he may have gone to bed already… .But, at
the end of the day, you can get mentoring from young people, old people,
medium-age people, and it makes a huge difference. My biggest mentor over
the last 15 years has been my friend Paula Jagemann here in the audience…
…The important thing is that you can learn from anybody. To succeed
in life, I think that the important thing is to help others. Raul [Fernandez]
said this, others said it, and it is really, really important that we
help each other. This community and this industry have grown so quickly
over the last 10 years because we've had a lot of people that have helped…and,
in my opinion, there's nothing more rewarding than helping somebody else
succeed. “
A family lost a husband and a dad, we lost a friend, and the region lost
a champion. Our thoughts and prayers go out to his wife Randi and son
Michael.
- Mario Morino
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