Welcome to the February 2011 edition of The Director's Dilemma.
The newsletter provides case studies that
have been written to help you to develop your
judgement as a company director. The case
studies are based upon real life; they focus on
complex and challenging boardroom issues which
can be resolved in a variety of ways. Each way
has different pros and cons for the individuals
and companies concerned. Every month this
newsletter presents an issue and several
Which response would you choose and why?
Wanda is a director of a small charitable
organisation. Last year the board approved an
ambitious fundraising drive to raise several
million dollars for a special project. The
organisation had a list of frequent donors to
campaigns but decided, as this was a large
campaign, to enlist professional help.
A professional firm was contracted to raise
the money on a combination of a fixed fee and
costs plus a percentage of the funds raised. The
percentage appeared reasonable and the fixed fee
was small in comparison to the target.
The campaign was a disaster. The
telemarketers had accents that donors could not
easily understand. Donors were wary of
foreigners calling regarding a local charity.
Most refused to pledge anything and only one
donor, who is a real friend to the organisation,
gave a large amount.
The contractor also bought lists of
prospective new donors. These lists were out of
date and, again, when contact was made very few
of the targets contributed. At the end of the
campaign the costs almost equalled the money
raised and the organisation received only 9
cents of each dollar donated. The total retained
was less than the largest single donation.
The organisation discloses fundraising in
its annual report and the board members are
concerned because the large donor will see that
the funds raised are less than the amount he
personally donated. They will also have to delay
the project and know stakeholders will be
disappointed as this had been planned and
discussed with them.
What should Wanda do?
What Wanda should have done 'at the
beginning' is both obvious and irrelevant
because she finds herself facing the aftermath.
I would recommend that in her current situation,
she does the following:
- Sack the external consultant and assess
their performance against the "promise" that
they made in their submission and for which
they were employed. If they used methods that
did not align with their promise, then there
may be grounds to recover some of the costs
and diminish some of the organisation's
- If the decision to recommend this consultant
was the responsibility of a staff member, then
review their experience, performance and
capability to coordinate and manage fundraising
- Review the way the board reviewed and
authorised the fundraising strategy and
appointed the consultant
- Bring onto the board a director with strong
fundraising (and public relations)
- Hire an external independent fundraising
consultant to build an on-going fundraising
- Have the Chairman of the board call a
one-on-one meeting with the sole contributing
donor to explain what happened, what the board
has done about it, and how fundraising and the
project's objective will be satisfied in the
- Be honest in the annual report, and as was
done with the donor, 'put it all on the table',
admit error, and move on.
There is no doubt that the organisation's
reputation will be damaged, but it will be
harmed more if it tries a 'cover up' - the truth
comes out eventually.
Jack Jacoby is a Director of Preiss Levy
Jacoby and Associates, based in Melbourne,
A board is responsible for strategy and
ensuring the organisation fulfils its mission.
Wanda's board should immediately review their
cash flow projections and ensure they remain
solvent. They may need to cut activities and/or
The next issue is a strategy review. What
can still be achieved without the special large
project? How important was that project to the
mission? They must provide management with an
achievable plan for the next few months until a
new strategic plan is ready.
The board needs to look at their
communication plan. Someone should visit the
large donor and deliver news of the fundraising
failure in person. The CEO or Chairman is best
for this job unless another member of the board
or staff has a better relationship. This is an
unpleasant conversation but it is better to have
it now than after the donor reads of the
disaster in the annual report.
Then the board should consider how they will
alert stakeholders of the change in plans. Has
the project been abandoned or just postponed
until funds can be raised? How will they meet
stakeholders' needs? Whilst admitting to the
failure it is important to show leadership and
have an achievable plan of action.
The board should delegate someone to meet
the fundraiser and if possible negotiate a
After this, the board should look at their
purchasing or procurement process and fix the
weaknesses that made this course of events
At no point should the board consider moving
away from their current excellent disclosure
policy; to do that would lose stakeholders'
Finally the board should reflect on their
role in this problem and its solution. What have
they done well? What did they do wrong? What
have they learned, as a group and as
individuals, to help them avoid similar problems
in future? Do they need to review board
McLellan is a specialist board consultant and
practising non executive director based in Sydney,
This is a grave situation for any charity to
be placed in, a situation that should not have
occurred in the first place. Unfortunately, many
small and some larger charities do not have the
appropriate expertise on their Boards, nor do
their Directors have sufficient time to devote
to the charity...which raises another question,
as to why they are there in the first place. I
suspect to add another line to their
CV...perhaps that is a little unkind, as they do
give an ego hour a month to their cause.
It is clear and obvious in this situation
that due diligence has not occurred, confirming
the lack of appropriate expertise on the Board.
One must question the fundraising
consultants that conducted the appeal; firstly,
in my opinion it is unethical for a firm to take
a percentage of the funds raised and secondly
telemarketing is no longer a relevant or popular
development strategy and will blemish the
reputation of a charity considerably.
My advice in this instance is for the
charity to be totally transparent, act with
integrity and advise all donors of the
unfortunate occurrence and personally discuss
the situation with the major donor.
Lack of post-event communication will be
disastrous; be transparent, be committed, be
passionate about the cause and rectify the
charity's current inadequate situation.
Penberthy is an expert in community relations and
public affairs, he works as a specialist consultant
based in Brisbane, Australia.
The opinions expressed above are general in
nature and are designed to help you to develop
your judgement as a director. They are not a
definitive legal ruling. Names and some
circumstances in the case study have been
changed to ensure anonymity. Contributors to
this newsletter comment in the context of their
own jurisdiction; readers should check their
local laws and regulations as they may be very
Book reviews - This month I have
reviewed David Bartlett and Paul Campey's excellent
Governance. It contains a very useful strategic
framework for not-for-profit boards
with an emphasis on effective relationships.
Sneak preview of my next book -
Presenting to Boards; practical skills for corporate
presentations will be launched in March. Here
is an excerpt dealing with the special case of
interviewing for a directorship.
Errata - In the December 2010 issue Theresa
Wilt's name was spelt incorrectly. This was
entirely my fault and I apologise unreservedly.
Relaxed Reading - I was inspired by the
memoir of my husband's great great grandmother.
She witnessed the retreat of Napoleon from Paris
(her father was a prisoner of war in France from
1803). Ironically her father became one of
Napoleon's jailers at St Helena. It is the
story of a small girl who observed daily
life during turbulent times. She faces
every adversity with fortitude and recounts
with simplicity and clarity the prison
walls, society balls, sailing ships and shopping
trips. You can find
it on Amazon.
Where's Julie? - A few readers manage to
catch up with me on my travels and it is such a
pleasure to meet them that I now share my travel
plans each month.
||Private client meeting
||8 February ||Sydney
||Australian Institute of
|11 February ||Sydney
||Australian Institute of
|18 February ||Newcastle
|28 February ||Brisbane
||Australian Institute of
|1 March ||Sydney
||Executive Women Australia
|8 March ||Sydney ||Australian Institute of
|10 March ||Sydney
||Australian Institute of Company
|17 March ||Wollongong
||Australian Institute of
|22-23 March ||Melbourne
||SOPAC Conference and
Please call or email me if you would like to
schedule a meeting or find out more about
attending one of these events.
This newsletter - If you have any ideas for
improving the newsletter please email me your
thoughts. If you are reading a forwarded copy
please visit my website and sign up for your own
Suggestions for dilemmas - Thank you to all
the readers who have suggested dilemmas. I will
answer them all eventually.
Farewell until the next issue (due 1 March).
Enjoy governing your corporations; we are
privileged to do what we do!
www.mclellan.com.au | PO Box 97 Killara NSW 2071
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