Navigating Today’s Nonprofit Challenges with Arnulfo Manriquez

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Human Services Group Vice President Sam Brown interviews Arnulfo Manriquez of the Manriquez Group to explore the evolving challenges facing nonprofit leaders, from funding pressures and board governance to leadership transitions. With his decades of experience in the nonprofit world, Arnulfo shares practical insights on adaptability, strategic decision-making, and how nonprofits can position themselves for long-term sustainability in a changing environment.

Sam Brown: Hello, everybody. You're listening to Rancho Mesa's StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host today, Sam Brown, Vice President of the Human Services Group at Rancho Mesa.

Today, I am joined by Arnulfo Manriquez of Manriquez Group. I'm really excited about our guest today. So, Arnulfo, welcome to Rancho Mesa and StudioOne.

Arnulfo Manriquez: Good morning, and thank you for having me here to join you in this conversation.

SB: Of course. Yeah, long overdue. You're a guest that we've wanted to invite in for many years, so I'm glad we're able to make it happen.

I really thought it would be timely to have you in today because our nonprofit clients and all of, say, San Diego's nonprofit leaders are facing a changing environment. I don't know if it's unique or not. I'm sure there are some differences and some unique characteristics, but someone of your experience, I feel like could speak to past lessons, maybe the role that the board could play in assisting leaders today or what that relationship should look like between C-suite and the board.

And as well as, hey, what are the skills that today's nonprofit leaders need to really sharpen, to adjust to decisions that they need to be making, perhaps some tough ones. So first of all, again, welcome. And hey, what's going on? What's new with you, Manriquez Group, and your personal life?

AM: Well, so the Manriquez Group is new. I've been working with nonprofit organizations for over 33 years. Actually, June was when I graduated from college, and my very first day at work was with a nonprofit.

SB: Nice.

AM: And so it is timely being able to then go off on my own, but really more focused on the reasons why you just talked about why I wanted to do this work. So from a personal perspective, it was the right timing for me as I have three children. All three children are out of the house for the most part. My oldest is in Scotland on their last year of veterinary school. My middle daughter lives in Long Beach Works in Disneyland as a hairstylist with the characters and also with the wigs out there, getting everybody ready out there. And my son has just completed his second year at UC Davis. And so when you look at what's been going on in my own personal life and the shifts, it was really timely for me to be able to go off on an adventure like this.

So in my own personal world the last couple of years I've taken a big interest and learning about wines. Not just going out and drinking them but really learning about the history of the wines the regions understanding where they come from why they taste the way they do and so I've been taking a lot of classes on there and so ultimately my passion has become a little bit more than just a passion. And Tonight, I'll be taking my level three certification for the Wine and Spirits Education Trust, WSET. So I'm a little excited, nervous for the exam. It's going to be a difficult one.

SB: Yeah. So just so everybody knows, I offered Arnulfo coffee and he said, no, he had to keep his palate clean today. So that's how serious this exam is. And I respect it. Nothing but water until this exam, probably. So that's exciting. And you've said that previously you've done some of your studying south of the border. In Mexico's wine region. So what have you learned there?

AM: Well, I've learned one is that I got enamored with the Valle de Guadalupe, with the overall region just by itself. Just going out there and enjoying the environment, the rustic and the rural feel of it, right? It's not fully developed. And then just enjoying meeting the winemakers and the wines. So for me has been, the last 11 years have been, it's the reason why I got so involved with the actual studies of my wines. And from all my classes were done in Spanish. This most recent exam is the only one I've taken in English. But what excited me is and what I've learned about is that Mexico is a very young winemaking region up here in the northern part. And when you compare them to those in France and Italy where they've been making wine for over a thousand years, it is something new and different. And I do actually think that all my lessons and classes and certifications are going to help me have an impact in the winemaking industry and out here as well, because that's the vision I have out here.

SB: Right. Well, that's exciting. I mean, love to see people fall on their passions, whether they be new or ones that have remained dormant for many years. So kudos to you. I wish you the best of luck on the exam today. I'm sure you'll crush it.

AM: Thank you.

SB: So regarding the environment that nonprofit leaders are facing today, what are some things that you feel like maybe are presenting some new challenges? And then maybe what are some challenges that you're seeing that maybe have always been there?

AM: I think the funding crisis that we're seeing right now, and I think crisis is the right word to use. It didn't just happen today. This has been in the building for the last couple of years. When you started looking at what was happening with the state of California budgets, and you started looking at the situations of the city of San Diego, the impacts of these funds, and then some of the referendums that they had on elections that they didn't pass. And so we knew that some of these things were happening. I was seeing them happen within the industry while I was there. It shouldn't be new for most nonprofit leaders, right? But it is.

People are treating it as if it just happened upon us. And so people do need to have, you know, all these government pressures that, you know, we've been feeling it, and they play a big role with the rest of the funding that's coming along, as well as the, with the federal changes that we've had. And we always know when a new administration comes on, we're going to see some changes, sometimes favorable to the nonprofit world, sometimes unfavorable. But we're in that latter part that we have seen a lot of flat funding in the funding sources. And we have seen where there are opportunities to pull back that's being pulled back. And so these are things that we needed to be prepared for, right? We had seen what happened back in 2016 in that administration. And so I kept thinking, that was the practice. And then this time around, it's going to be when the influences do happen and make bigger changes there. And so it's happening.

SB: I find that there's a phrase that has been used called mission creep. And that would be sort of a practice where an organization may venture away from its original roots to pursue maybe programs that are in need in the community or some funding that has become available and is sort of riding a wave of popularity. What would you say to an organization that wants to broaden its revenue streams, but also maybe not put itself in peril by doing a poor job if it's accepting new contracts?

AM: That's a great example because I see it often. It's that mission creep is what we know. Sometimes we call it, we're chasing the money.

SB: Yes.

AM: We're chasing where the money is so that we can make that next payroll for the next year or two. And really what an organization has to be doing right now is, normally, organizations only look at one year to year for the next year of their budgets. But ultimately, we should always be looking at three to five years. We should be planning out where these contracts that we have are going to go, how the fundraising and what changes in the government we might be seeing that might impact us. And so really focus on doing at least a three-year projection of your budgets.

And pay attention to that mission creep, the chasing the money, because it's what gets us in trouble sometimes, right? When we get cuts in certain areas, sometimes we can get a temporary fix by doing some fundraising until we re-stabilize again. But there's a phrase that people use that say, stick to your knitting, like really stay good, you know, focus on what you're good at. If you're going to venture out, it needs to be a strategic venture out it needs to be focused on this was part of our plan this was part of our strategic plan this is where we wanted to go and grow and if it's not there stay away from it.

There are moments right now where in this current environment that we are receiving cuts organizations are receiving their cuts and sometimes it's to the point where you're not getting cut fully but you're getting 60% of what you got in previous years. And pay close attention to what that's going to do with your operations, right? We are not going to fundraise our way out of this. This is not just going to be an anomaly for this year. And so if you can operate at that 60%, if you can pull back and operate it, then do that and begin to look at how you diversify your funding, not chase it. But you also might need to make a decision of saying, Can I do a good job with this 60%? Am I going to chase my tail trying to do the fundraising to keep the rest of the staff that we had going? And we are in an environment where you're going to have to focus somewhere. And if you start going out there and saying, we're going to increase what we are already fundraising to keep this program going, this year and next year might be the time where you say, this is not a viable program for us. And we need to pull back.

And have conversations with your peers, right? If there's another organization that's operating the same program and they also got cut 60%, figure out how you can do this work. It might just be where they've been doing a much better job. You can pull back, maybe they can get that funding or you can subcontract some of the work to them so that you're not having to do that fundraising for now. So there are maybe some temporary solutions that might be two, three years, but don't try to make, this is not the year to try to make it all work because there's more coming.

AM: Yeah, I think that's sage advice. And I've seen where clients and other organizational leaders in town are having to make tough decisions about which of their contracts are financially viable to say, well, if this contract has been a loss leader, then is that maybe first on the chopping block or maybe you don't pursue the renewal or participate in the RFP when it comes up for renewal.

But speaking of RFPs and given the financial crisis or funding crisis, as you mentioned, do you feel like this is going to become a more competitive environment for these various contracts or RFPs that maybe organizations have always felt like they sort of owned the contract without much competition previously?

AM: Yes. And they will, it's always been competitive, right? We've always had the, even if it's the contract that organizations have had for decades, it's always been a competitive process. But I think it's going to be a different type of competitive process. There are bodies of government that are shifting their strength, where they can make and vote decisions where they couldn't before. You've got the county that's been looking at how they're going to subcontract a lot of their programs, but they're also receiving cuts from the state and the federal government. So sometimes it may feel like we're just getting all these county contracts, but they're really tied into the overall picture. And so those are the places where you need to be paying attention to.

And it's a time where you have new leadership there. And they may be saying, you know what, maybe it's time for a change. If there's an organization that's been doing that work for 20, 30, 40 years, and there have been, that there are other organizations that can look at it in a different perspective and look at our current environment and that can adapt a lot quicker than organizations that have some. calcification in them.

SB: Okay. So I think you and I talked about this yesterday a little bit. Sounds like with those changing government bodies, you have new representatives in those roles. Maybe those longstanding relationships that were once very strong are getting a little bit of a shakeup as well. And so the new governmental leaders may be bringing a new perspective and saying, well, you know, what does this other organization have to offer? And maybe taking a closer look at other entrants into the RFP process.

AM: Yes. And we all belong to a certain generation, right? You know, I'm Generation X. We've got the Boomers. We have the Millennials. Gen Z is playing a big role in what's happening in the overall environment, right? In the political environment, but also in they're beginning to fill a lot of these roles. And you are seeing some of these stepping into, like, let's start our own nonprofit. Let's start doing this work and think in a very different way. It's not a bad thing that these changes are coming or that these changes may come, right? But it does behoove us to take a step back and say, okay, we are, you know, if you're a leader that has been doing this for many years, are you listening to your staff, are you listening to the different conversations that are coming up of to what they're seeing out in the community what they're facing day in and day out and how they're looking at the overall environment because um Sometimes we get stuck in our ways and this is something, it happens every generation and happens every time. When you talk about, we used to have real music back when, right? I don't know that I've ever really used that phrase because I am stuck in my own music and I've tried to go find new music to listen to. But that's what leaders have to do. They have to go in and understand out there, how this generation is perceiving their realities, right? And what are some of the ideas that they have to be able to shift? I think that's going to be important to stay competitive in this process.

SB: Okay. So the board of any nonprofit organization should play a role in some of these tough decisions. But what should the process look like whereby the C-suite, the CEO, the chief operating officer, the CFO are informing the board to a degree where everybody, board member, finance committee, governance committee, C-suite can make some of these tough decisions?

Because I imagine I would bet you that not all board members feel informed, which that should be a concerning feeling if that is true. So how does an organization avoid that?

AM: Well, it is a two-way street, right? You join a board because you're passionate about it. You care about it. You care about the work. You care about the community that it serves. And you want to make sure that first that you attend the board meetings. That you read the information ahead of time, that you participate in the committees because that's where the biggest work happens. And if you feel as a board member that you're not fully informed, you have the ability to ask all these questions and over ask sometimes, right? But do understand your role as governance, right? You're asking governance questions. You're not asking about how are we doing the intake on these forms when the participants walk in, right?

SB: Right.

AM: And so stay at the level of governance for the organization. And do be prepared to have the conversations about we just received a 60% cut on these funds. How is it that we want to work this through? And the board can provide that direction generally about saying, you know what, maybe it is time that we pull back from this program. It's not going to kill the organization. It is going to shift. You may have to do some layoffs, but you are looking at the long-term viability of the organization, right?  Sometimes these temporary fixes can pull you away from that overall vision.

And so board members need to be prepared to have those conversations. And when they come to the board, right, I think that's important when the CEO and leadership staff are having this conversation with the board, be thoughtful and understand that they have gone through several iterations, right? So when an opportunity comes up and says, I think we need to pull back, it's not an easy thing for any executive to say that, right? So it comes with a lot of difficult process to get there. Nobody really wants to do that. So be thoughtful of that and then plan out how you're going to be communicating this.

SB: Right. When you've been the leader of previous organizations, was it a priority of yours to make sure that You had board members that had previous board experience with other organizations so they could bring those experiences into the room and decision-making process?

AM: Well, not necessarily. It's not always the case, right? Because there has to be a first time for somebody to step into a role. And the organizations that I've led more recently are complicated. Complex organizations. Multiple programs, federal funds, different roles that the boards have to do and approve and move forward. And many times they are technical decisions that they are approving that they don't necessarily understand, right? Real estate transactions and surveys with the participants of the child care programs or the preschool programs and so forth.

But it is important that we also build board leaders. Future board members that may be able to also go and sit on other boards. And I am a big proponent of organizations and people and individuals that care about their communities, that they get involved in their own boards. And so while I've been executive and I've had board members and I've reported to boards, for the last 32 years, I have sat on boards. Not the same board, but there are term limits in many of these organizations, but I've consistently sat on different boards that I care about of the work that they do, making sure there is no conflict of interest with the work that I'm doing.

But all of that experience has taught me governance, right? Understanding how my board works with me and understanding how I can work better with the executive as a board member. And I've had the role of board chair on multiple occasions. And these have been local organizations, regional, statewide boards and national boards. So to me, it is that experience matters and it's important. If you're interested in being a board member, you don't necessarily have to start out at the biggest organization or the one where everybody wants to be a board member. Go find the ones that you care about and you start then connected and understanding the roles. But be present, right? Be there and always ask the questions.

SB: Right. Yeah. Be present. Be active. Probably the worst term we could ever use is “sitting” on the board. We don't want sitters. We want doers.

AM: Perfect word.

SB: So in your role then as interim CEO, are there any commonalities regarding the various challenges that you've accepted? Or do you think that there's a certain maybe set of circumstances that makes an organization ripe for bringing in an interim CEO?

AM: Well, there's two things. One, when there is an existing CEO, I think it is important to start looking at kind of collaborating and sharing some of this work with other organizations, right? We talked about mergers of organizations, but merger is not always the answer, right? Sometimes it is, you're going to have a shared CFO, you're going to have a shared grant writer, you might have a shared compliance officer or HR that are going to help the organizations. But when boards are beginning to look at a transition and when they're looking at whether it's their decision to exit the CEO or the CEO has given notice and they're going to be leaving. On some occasions they're going to be left without a CEO and then they may promote an internal person to the CEO role or as an interim role. But the boards need to be strategic about what's going to happen with that role. You don't want somebody that's going to sit there or maybe, you know, we used the word sitting right now but yeah there's going to be able to sit there and kind of like do status quo and keep the operations until the new permanent person comes on board.

I think it's the moment of opportunity for boards to be able to bring in an experienced CEO that is not interested in being there for the long term, but that someone that can come in day one and start not just keeping the organization stable, but looking at all the places that need to be addressed, that need to be fixed, that need to be shifted or restructured. And every organization will have it.

Successful organizations with successful CEOs that are on their way out. The boards are still going to have some form of limited information because it's what they get. But it's always great to have that third party come in and they can give them and paint the picture of what exactly is in front of them so that when they hire the new individual coming in, that new individual is not going to come back two, three, four months later and say, I discovered this, I found this out, and we have to make these decisions or we didn't do X, Y, Z. And it happens a lot more often than you think. So if you sat on a board and you've had transition, you know what I'm talking about. So be very intentional, right? Interim roles are not somebody that's going to come and step in and keep just normal operations. You want to make sure that they're going to come in and they're going to be able to understand the structure and they can share with the board. So then the board will know exactly who they need to go out and hire.

SB: No, that's interesting. So it sounds like there could be a very intentional decision to when there's a CEO transition rather than going from, say, a long tenured CEO to the next hire, the next permanent, quote unquote, permanent CEO to say, hey, let's bring in an interim CEO who may uncover some things or look at it from an impartial perspective and educate the board as well as other stakeholders.

When it is time to actually get that new, hopefully long tenured CEO in place, maybe a maybe a middle step to say, OK, maybe we're not ready for that, quote unquote, permanent hire. So let's get there with maybe a different perspective first.

AM: Yes. And it does really it will make it easier for the board to make a decision of who that individual is once they know exactly what they have in front of them, right? If there's a problem and the fix is going to be long-term, they will understand that they're going to need to bring somebody with those strengths that can move that organization, right? You don't want the interim providing the vision of how the organization is going to move forward. They are going to bring a vision, but it's a short-term vision, right? This is the time that I'm going to be here, and this is what I plan and can do with this timeframe that I have. But I do feel it will make it a lot easier for board members to identify that next leader. And it may be a leader that has not been an executive director before, but because they know what's in front of them and they know how they can put the guardrails to help this new person coming in, they can now provide opportunities and open doors to people that normally would not have been looked at before.

SB: That makes sense. So given what you've seen, the various organizations that you've sort of ushered into a changing landscape, or as you're paying attention to headlines and talking to leadership, both at the state level and local; what are some skills that you feel like today's nonprofit CEOs ought to at least have or be working on to ensure their success today and then in the future?

AM: Well, you're going to, you know, leaders now, they have to be okay with bringing difficult decisions forward, right, for the board members if it needs a board decision. And being able to implement them themselves, right? So it is always important to be present it is important to be, to communicate it, right? Don't dismiss when questions come up from difficult decisions that you've made and it is a moment of adaptability those that are going to succeed those that are going to be able to keep their organization strong it may not be as big as the organization as they were operating a year ago but those that are able to adapt and make those shifts are preparing themselves for the long-term success. So adaptability is important. And being prepared to look at a merger. I think that right now, the opportunities are more ripe for a merger. And this is something, you know, mergers have, conversations have happened over the past many years. Funders sometimes will say, why don't you guys just go together because you're all asking me for the same type of money. And so there was a time and a place when it was right, when it wasn't right. We're at a moment right now where it does make that important strength for that organization.

You look at the corporate world out there and you see some of the stronger corporations out there are the ones that have merged, that have bought other corporations and so forth. Not that it's a model that is aligned for non-profit organizations but they do it because it strengthens them moving forward and when you look at it from that perspective boards need to be paying attention to where it matters, right? And so from the leadership of the board, boards should not be rubber stamp boards, right? That they follow whatever the CEO says, that they do need to pay attention. They do need their own separate time. They do need their own closed sessions. And they need to be having some of these conversations because boards have a lot of power. Not many boards use that power. And I'm not saying go out and use it every day because then it's going to be crazy for the executives there that are reporting to those boards. But boards do have the ability to influence and to make these decisions. And so have the thoughtful conversations, have the data that you need to be able to make those decisions. So leadership at a board level is ultra-important right now because they may bring over the change that the CEO may not be thinking about or may not want to be doing.

SB: Okay. So we've talked a lot about the current environment. We've talked about how some challenges that maybe have always been there, maybe some challenges that folks would consider new, although they may have been in the building for a couple of years now. So we've talked about the role of the board, as well as how maybe an interim CEO could influence in a positive way the path of the organization. And then as well as some skills that existing leadership should either work on or hone and maybe a future path and maybe some opportunities.

So we've talked a lot about some really important subjects that I know I'm talking with my clients about. Sometimes we might be talking about insurance on the same conversation. Other times they may be giving me a call and saying, hey, we're thinking about going in this direction. So this has been a helpful conversation for me. And I know our audience will gain a lot from it as well.

Going to a lighter side, I don't know if you've ever seen the movie City Slickers, but there's a scene where they're sitting around the campfire and there's two characters who are supposed to be sort of the Ben and Jerry's Ice Cream founders. They don't use those words. I think it's Ira and Barry. If I'm not, I think it's Ira and Barry. And they're sitting around the campfire and Billy Crystal's character says, “All right, I'm going to give you a meal and you need to tell me what ice cream. I should consider on that meal.” And it's a pretty funny scene.

So coming from somebody who is not a connoisseur of fine wines, these might be softball questions for you. And you might be wrong and none of us would know, but I'm going to ask you anyway. So, okay, I'm sitting around, I'm going to have a filet mignon, heavy on the pepper, with maybe grilled asparagus and maybe some, and a baked potato. Let's go real simple here. Just a baked potato. Yes. What would be the glass of wine of choice for you?

AM: Well, that's a big heavy cut of meat and with the peppers out there, with the spices. So you don't want a wine that is going to get lost, right? Because that flavor can take away a lot of the flavors of the wine. So you want to bring in a wine that is going to pair up and have a couple rounds against that steak that you're looking at. So my own personal favorite and my go-to would be a 2020 or older Barolo. And because it has the right amount of tannins, it has the right amount of acidity and the fruit that is going to be able to really pull out and enhance the flavors of that steak out there. It's not everybody's wine, but you can have a Pinot, a nice Pinot Noir that's going to be if you're looking for a little bit lighter. But I think the average of what most people will be going to is getting a Bordeaux blend. That Bordeaux blend is going to be very, it's a lot more palatable to a lot of people. I personally like the stringency of the Barolos. A nice Bordeaux blend is going to be doing great with that state.

SB: Okay. I like that answer. Thank you. Good explanation too. All right. One more for you. So I'm going to, let's see, I'm going to grill up some swordfish and maybe some scallops as well. My vegetable would probably be some green beans that I would probably just throw some lemon juice on there and some sea salt. And then let's say we have some air fried sweet potatoes with a little bit of cinnamon on there. What would be a glass that you might or a bottle you might reach for?

AM: Oh, right. Well, you're going to be looking for a white. You're going to be looking for acidity, right, to match that acidity of some of the citric and some of the seasoning that you'll be using, and that swordfish and the scallops there. So there's a couple ways that you can start, right, depending on how many people are going to be there eating, right? If you only have a glass of wine or a bottle of wine that you're going to go have for this dinner, I would go with a Sauvignon Blanc, a Sancerre from France or a Sauvignon Blanc from New Zealand. It's going to, that crispness, that the acidity is, if you're going to be looking at Sauvignon Blanc from New Zealand, you're going to be looking at a little bit more fruit forward, a little bit riper grapes out there. If you want to look at more of the mineral, style of the Sauvignon Blanc, then you can go with the Sancerre from France.

SB: Well, those are, I do like a good Sauvignon Blanc. I really do. So I'm glad you said that. So if my wife's listening to this, maybe we can make that happen.

AM: Thanks.

SB: Well, I've enjoyed this conversation. I know that you come from such a broad background, leading different organizations. You and I had the pleasure of working together in your last role for, shoot, I don't know, maybe 12 years or so before you decided to found the Manriquez Group. So I know that the future is bright. I know your future clients and current clients will benefit greatly from the knowledge and expertise that you bring, as well as your ability to communicate.

So this is a good opportunity for me to say from all of Rancho Mesa, thank you for entrusting us as the insurance agent at your last role. But then also, if there's anything that we can do to support you moving forward, we'd be happy to do so and really appreciate you coming in today.

AM: Great. Thank you so much. And, you know, I do want to, and I did want to add that there are ways that you can go raise money. There are go, you know, ways that you can kind of structure some things. But insurance can play a big role in savings, in being able to manage your organization.

And I want to use the example that you and I experienced when we had to go in and look at our insurance brokers for the workers' comp situation of the organization. Insurance can be one of those where organizations are not paying attention to. It is something that we just all have to pay and we go in and day out. But if your insurance broker is not spending time with you. If they're not keeping you up to speed of the changes that are going out there, they're not consistently coming up with you and saying, we need to do this training with staff because in the long run, this is going to save you money, right? Because you know the industry, you know what's happening moving forward.

So if that's not happening, you need to then switch to a broker that is doing that, that is paying that attention because the experience that you and I had at MAAC where we looked at the workers comp many years ago where we consistently save money every single year we started really having those efforts that then evolve into the rest of the insurance world out there. So I want to one is that pay attention to that I want to do the appreciation and thank you because that played a big role in the budget planning for us as an organization and so listen to Sam because he knows what he's talking about.

SB: I appreciate that. That was a great partnership was formed when MAAC selected Rancho Mesa. And we took that very seriously. We felt very prepared to take on the role of insurance agent and advisor for MAAC. And we were correct. I think both parties were correct.

AM: Yes, absolutely.

SB: No, I appreciate you bringing that up. And the successful partnership continues. Really want to appreciate or send words of appreciation to Arnulfo for spending time with us today. And if anybody has any questions or concerns or would like further information about the content here, I can be reached at sbrown@ranchomesa.com or 619-937-0175.

And Arnulfo, what's the best way to get in touch with you?

AM: Best way to get a hold of me is themanriquezgroup.com. And my phone number is 619-726-4441. You can get out there. And my email is arnulfo@tmgleads.com.

SB: Excellent. Well, this has been fun. Thanks, Arnulfo. And thanks, everybody. Thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at ranchomesa.com and subscribe to our weekly newsletter.

The Critical Importance of Nonprofit Executive Transition Planning

Author, Jack Marrs, Associate Account Executive, Rancho Mesa Insurance Services, Inc.

In the world of nonprofit management, the departure of an executive director can cause a time of uncertainty. This kind of challenge is why all nonprofits need a well-crafted executive transition plan. This plan is not just a roadmap for navigating the change in leadership but a tool for sustaining and growing the nonprofit's mission. In this article, we will dive into the importance of having an executive transition plan, the key components that make up an effective plan, and the benefits it brings to the nonprofit sector.

Understanding the Role of the Executive Director

The executive director's role is crucial in shaping the nonprofit's direction, culture, and public image. These leaders have many roles from strategic planning and fundraising to staff morale and community engagement. Therefore, the departure of an executive can leave a void that is difficult to fill without a transition plan in place.

A well thought out executive transition plan begins with a deep understanding of the executive director role within their nonprofit. It involves evaluating the organization's current needs, future plans, and the specific qualities in a new leader that will allow them to successfully fulfil the nonprofit’s mission moving forward.

Alignment and Visioning

The next step is to make sure that the organization’s future plans align with the board’s vision. In order for the organization to continue to be successful, everyone needs to be on the same page and have a deep understanding of the organization’s goals.

Developing a transition plan that is prepared for different types of departures like planned, unplanned, or strategic, shows your level of preparedness. Whether the transition is expected or sudden, having a clear plan in place minimizes disruptions and allows the organization to focus on its mission.

Cultivating Internal Leadership

One of the plan's key components is the focus on internal leadership development. By identifying and training potential future executives within the organization, this will create qualified employees ready to step into a leadership role when needed. Also, internal employees bring a deeper understanding of the nonprofit’s culture and operations, making the transition period much smoother than hiring from outside the organization.

The Search for New Leadership

Finding the right executive to guide the nonprofit through its next phase is the most important part of the transition plan. This process involves setting clear criteria for the ideal candidate, conducting a thorough search, and the selection process itself. The plan should outline the steps for advertising the position, screening candidates, and holding interviews, while keeping the organization’s mission on the forefront.

Also, finalizing the transition does not simply involve the selection of a new executive director but also ensures that they are fully integrated into the organization. This would involve a detailed onboarding process where the new leader is introduced to the team and understands the nonprofit's operations.

The importance of having a comprehensive executive transition plan cannot be overstated for nonprofits. By thoroughly understanding the role of the executive director, aligning the transition with the nonprofit's vision, cultivating internal leaders, selecting and integrating a new leader, nonprofit organizations can successfully navigate the executive transition with confidence and ease. This approach not only protects the organization's mission during times of change but also sets it up for future success.

With a strong presence representing the insurance needs of nonprofits throughout California, Rancho Mesa prides itself on understanding both the risk management and operational components within this important space. For questions on this article or to learn more about how Rancho Mesa can help your organization, contact me at jmarrs@ranchomesa.com or (619) 486-6569.

Resources

https://alysterling.com/nonprofit-executive-director-transition/
https://www.philanthropy.com/article/the-great-nonprofit-leadership-turnover
https://boardsource.org/fundamental-topics-of-nonprofit-board-service/executive-transition/
https://buildingmovement.org/reports/the-leadership-in-leaving/

Risk Bow Tie Exercise

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Rancho Mesa’s non-profit clients successfully serve their communities in changing economic and political climates. In part, their success is due to managing risk for an organization’s employees, clients, finances, and mission. Just as important, but less discussed than risk management, is risk analysis. This article offers one helpful tool non-profit leaders can use to facilitate risk analysis, the Risk Bow Tie Exercise.

Introduced to Rancho Mesa by the Nonprofit Risk Management Center’s book World-Class Risk Management for Nonprofits, the Risk Bow Tie technique helps nonprofit leaders consider an event’s positive and negative consequences in a group setting. Following the exercise, participants may feel empowered to utilize the technique in multiple departments to analyze both expected and unexpected events. 

The five steps of the bow tie exercise include:

1. Identify a potential event.

2. Identify some of the underlying conditions that make the event more or less likely, more or less impactful, and more or less urgent.

3. Identify some of the consequences or ripple effects,  both positive and negative, should the risk materialize.

4. Identify preventative risk management steps or controls that could make the event less likely or less detrimental.

5. Identify risk management steps or controls that could be planned now, but implemented after the event has occurred, to reduce the potential negative consequences.

The image below, from page 152 of World-Class Risk Management for Nonprofits, is a sample Bow Tie Worksheet.

Risk Bow Ties Worksheet image provided by World-Class Risk Management for Nonprofits.

Performing the exercise in a workshop or group setting will usually provide one or more of the following insights:

• The group uncovers details of an event that had not previously been discussed or observed.

• Both positive and negative consequences can result from one event.

• The exercise brings to light unique perspectives and experiences from multiple participants.

• Identifying important underlying conditions and consequences better informs the creation of relevant controls.

• Team members can perform a risk analysis in a fun, accessible and informal way.

Nonprofit leaders can use a diverse set of tools to analyze and manage risk. Rancho Mesa encourages clients to ask about various tools we have available to prepare for both the expected and unexpected.

To learn more about the Risk Bow Tie technique contact me  at sbrown@ranchomesa.com or (619) 937-0175.

California Non-Profits Brace for Higher Insurance Premiums and Dramatic Changes to Coverage

Author, Chase Hixson, Account Executive, Human Services Group, Rancho Mesa Insurance Services, Inc.

For years, the insurance marketplace for non-profits, specifically general liability, abuse, property and management liability have been somewhat stable (subject to loss history, of course). Unfortunately, that is looking to change as the marketplace braces for significant correction.

The key drivers of change:

• 2018 Wildfire Season
  An estimated $12 Billion in losses has forced carriers to offset those losses with higher premiums, regardless of the amount of property exposure. Reinsurance markets (insurance for insurance companies when a loss becomes catastrophic) suffered significant losses, as well, and have had to increase their rates on the insurance companies they insure.

• Increase in Harassment/Discrimination Claims
  Though the exact reason is unknown, many point to the #MeToo movement as the reason for more than double the harassment and discrimination claims that have occurred the last three years. We have already seen significant increases not only to premiums, but also deductibles.

• Incoming Influx of Abuse Claims
  With changes to California law, insurers expect an uptick in claims beginning January 2020 when the statute of limitations will be lifted for reporting child abuse. We expect to see significant increases in premium as well as coverage being reduced or even eliminated in some scenarios.

What can you do to help your organization? Get out ahead of it early and be prepared to sell your organization to the marketplace. The insurance carriers will need to have a clear picture of what your organization is doing to be different when compared to the organizations that are causing the losses. It may seem like a lot of information to present to a carrier, but failure to do so will lead to increased costs for your organization.

Contact Rancho Mesa Insurance at (619) 937-0164 if you would like to discuss how these changes may affect your organization.

OSHA Offers Grant Programs to Nonprofits

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Nonprofit leaders who want to make workplace safety training more accessible may be surprised to learn about a unique grant program through the Occupational Safety and Health Administration (OSHA).

Since 1978, OSHA has offered grants to nonprofit organizations for safety training. Specifically, grants are awarded on a competitive basis to provide employees with training on the recognition and prevention of safety/health hazards in the workplace. The intent of the program is to reach audiences who might not otherwise receive safety training. OSHA renamed the program the Susan Harwood Training Grant Program, in 1997.

Grant applications in the past have typically fallen into three categories:

1. Capacity Building: OSHA awards these grants to help an organization grow or build its capacity to provide safety and health training to target audiences; small business employees, hard-to-reach or low-literacy workers, and workers in vulnerable and high-hazard industries.

2. Targeted Topic: These grants focus on occupational safety and health hazards associated with one of the OSHA selected training topics.

3. Training Materials Development: Grantees develop training materials on one of the OSHA selected training topics.

Although state or local government agencies are not eligible to apply, nonprofit organizations, including qualifying community and faith-based organizations, employer associations, and labor unions may submit applications.

The Harwood solicitation for grant applications can be found on the government-wide Grants.gov website.     

3 Ways for Nonprofits to Opt Out of Unemployment Tax

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Nonprofit leaders who want to reduce overhead and tax burdens should consider revisiting their organizations’ unemployment tax status. More to the point, thanks to the Federal Unemployment Tax Act of 1972, nonprofits can eliminate the unemployment insurance tax and outsource the headache of claims administration. Let’s investigate further.

Traditionally, the state charges a nonprofit employer payroll tax to fund the state unemployment insurance program. Each nonprofit’s tax rate adjusts each year depending on employee turnover and unemployment claims. According to several sources, nonprofits pay an average of $2.00 in taxes for every $1.00 in paid claims. So how do we reduce this overage?

Now for the good news; nonprofits are not required to pay the state unemployment tax. Provision 3309a of the Federal Unemployment Tax Act allows 501(c)(3)s to choose whether to pay into the state program at the prescribed tax rate, or to pay into the program an amount equal to the actual unemployment benefits paid out by the state program. In other words, a nonprofit employer may “opt out” and reimburse the state.

Below are three “opt out” and administrative solutions a nonprofit should consider depending on its desired level of risk.

1. First Dollar Insurance: A private insurance company provides a fixed rate based on the nonprofit’s individual claims history and expected future claims. This option provides budgetary certainty with a low-risk product. If unemployment claims exceed expectations, there is no additional cost to the employer.

2. Customized Stop-Loss Insurance: For nonprofit leaders who want to accept more risk and realize higher savings, the employer pays an agreed upon self-insured retention, after which point the insurance company pays all benefits.

3. Nonprofit Unemployment Trust: For nonprofit organizations with high employee retention or low unemployment claims frequency, a trust can offer a high return in exchange for higher risk. In most cases, the trust protects the employer against unexpected, catastrophic charges. The nonprofit employer has a high retention that must be met before the protection is triggered.

Each solution presented above provides services to further reduce risk and unemployment expenses. These services include claims management, hearing representation, unemployment cost management training, and transparent billing and accounting.

Whether the nonprofit pays unemployment taxes or reimburses the state, there are advantages and disadvantages. Nonprofit leaders who understand these details and the nuances of each solution will have the confidence to move forward in the direction that best suits the organization.

Four Factors When Developing a Nonprofit Agency's Youth Protection Plan

When designing youth protection measures, many nonprofit leaders want to understand the industry’s “best practices” and incorporate what already works for others. Unfortunately, it is very difficult to identify one set of “best practices” or a universal checklist all organizations should adopt. As a result, it will benefit nonprofit leaders and their clients to tailor daily practices to the unique exposures and operations of the agency. When doing so, it’s best to consider four important factors when designing a youth protection program.

In A Season of Hope, authored by the staff at the Nonprofit Risk Management Center, the authors refer to these interlocking factors as the “Four P’s: Personnel, Participants, Program, and Premises. Let’s explore:

Staffing

The nature of the services offered to youth will dictate the staff’s professional background and education. Those nonprofits offering therapy and counseling will aim to hire employees with advanced degrees; whereas, some programs may feel comfortable hiring responsible teens and young adults. In each case, supervision and background checks are vital to client safety.

Participant Mix

Is the agency serving a pre-school program for kids who are relatively close in age with similar needs? Or, perhaps, it is a group home involving minors who all have differing special needs due to their unique family situations and backgrounds. What unique risks to the organization does each group present? Considering the characteristics of a nonprofit’s youth clientele will shape an organization’s approach to youth protection.    

Program and Mission

An organization must consider how its mission and programs will impact youth safety. A nonprofit conducting group outings to encourage social behavior will not have the same concerns as an organization matching children with foster families. Each will present unique exposures. 

Environment

Nonprofits serve youth in a wide range of venues and environments, and each present different risks. The variables can include supervision, activities at height, access to emergency care, and sleeping arrangements. Knowing this, it is vital for an organization’s leaders to identify how a venue presents risk to youth safety and then plan accordingly. 
   
“My Risk Assessment” is a very strong tool available through Rancho Mesa Insurance Services. This interactive module allows nonprofit leaders to identify potential gaps in risk management in a number of areas, including client safety, transportation, and facilities.

Keeping young clients safe while in a nonprofit’s care is a core promise of the organization to the community. When nonprofit leaders take a careful look at the four P's, they can reduce the risk of harm while also ensuring the mission endures.

Please contact Rancho Mesa at (619) 937-0164 to learn more about sound risk management practices.
 

W-2 Phishing Scam – New Potential Risk to Nonprofits – Be Aware!!

It has come to our attention that there has been a recent increase in attempts of phishing scams involving W-2 forms in nonprofit, schools and other human services organizations.  

Rancho Mesa cautions any business, but particularity organizations in these sectors, to be very cautious if they receive any emails requesting information regarding W-2 forms, earning summaries or any other employee sensitive information.  In many cases these emails look like they originated from a high level employee and are sent to other high level, human resources or payroll department employees.

We have included a link to the most recent release from the IRS concerning this issue.  Please review it and call us if you have any questions.

Dangerous W-2 Phishing Scam Evolving; Targeting Schools, Restaurants, Hospitals, Tribal Groups and Others
Published February 2, 2017
www.irs.gov/uac/dangerous-w-2-phishing-scam-evolving-targeting-schools-restaurants-hospitals-tribal-groups-and-others