Starting in February 2015, the staff, consultants, ad-hoc and advisory committees all worked together to put together the pieces of the business plan and begin executing it. The primary focus areas included leadership, finances, legal, communication, and operations.
Leadership: Board and Executive Director
Which first: the board or the executive director?
One of the most debated decisions was whether to hire the executive director first to get the organization up and running more quickly, or bring together a founding board that would then hire its first staff leader. Here are some of the things we considered:
Reasons to recruit the board first:
- Choosing an organization’s executive is one of the fundamental responsibilities of a governing board.
- Respecting the board’s autonomy to choose its leader was in keeping with our values of sovereignty and self-determination.
- The Foundation could retain some influence on the executive selection by appointing the first five board members, while maintaining some distance by not directly appointing the executive.
- Having a board in place earlier would establish assets and skills that will be helpful during start-up and launch like convening power, knowledge of the political and institutional landscape, and advocacy.
- With a founding board in place sooner, the organization could more quickly start filing for incorporation, nonprofit status, etc.
Reasons to recruit the executive first:
- Would give the leader the opportunity to influence the founding board’s composition.
- Provides the Bush Foundation more direct influence over who the executive would be.
- Ability to point to a strong, respected, singular leader could be better-received in Indian country.
- Would help transition the work from our Foundation’s staff and provide more continuity for Rebuilders and Indian country at large.
- Our board would be more likely to give the full green light on launching the new organization knowing who the executive would be.
Ultimately, we decided that the best option was to appoint the founding board first, then have a committee comprised of board members and Foundation representation lead the executive search and selection process, and for the newly-formed board to officially hire the first executive. This slowed us down by a few months, but it also allowed the new board to own the hiring of its leader, which we still believe was the right decision.
We decided to appoint the organization’s initial five board members, one of whom also served on our Foundation’s board. While some funders might have considered creating an ongoing “reserved seat” on the new organization’s board, we felt that a limited lifespan on that initial appointment was more appropriate. We felt strongly that a reserved seat would represent both a perceived and real overreach in the long run.
While the initial board was comprised of five members, we envisioned growing to become a board of seven to nine. That said, board growth and size—along with other governance decisions—would be left to the new board’s discretion.
We looked for individuals with the following characteristics when identifying candidates for the founding board:
- Champion for Native nation-building work.
- Credible based on experiences in nation building; have been through the challenges, on-the-ground.
- Deeply respected in Indian country and perceived as impartial.
- Knowledge and experience with governance and how boards work.
- Non-natives must be stratospheric in stature and credibility.
- Fundraising experience.
- Knowledge of and connections in the Native philanthropic landscape.
- Experience serving on the board of a new organization.
- Diversity in age, gender, tribal representation, and functional expertise.
“Work on getting a deep bench for the board right away; take the time to grow the roots of the organization deeply from the beginning.”
— Tracey Zephier, Board Member, Bush Foundation and Board Member, Native Governance Center
Fortunately, our top five candidates all accepted, and in September 2015 the new board held its first meeting.
A five-member search and selection committee, comprised of a mix of our Foundation staff and Board members and board members of the new organization, led the search for an executive director with the support of an external search firm. We conducted an RFP process hoping to hire a native-owned firm, if possible, but that effort surfaced limited options. Instead, we supplemented a trusted search partner with a committee and supporting staff that were either Native or well-connected in Native communities.
The search took about seven months, from hiring the search firm to extending an offer, and included targeted outreach to potential candidates, applicant reviews, phone screens, supplemental information requests, and in-person finalist reviews. The final two candidates also completed supplemental assignments to help the committee understand how each would address initial tasks in the role. Two small lessons we learned from this search: first, that we could have benefitted from finding and integrating a search firm earlier in the process; and second, while we did our best, it’s really hard to explain a job that doesn’t exist.
Ultimately, the hiring committee recommended a candidate, which the new entity’s board approved and hired in December 2015.
Because we weren’t building programming from scratch, and had a good handle on what much of the program activities cost, it was relatively easy to build out a budget for the new organization. Most of the cost was personnel-related, so our Foundation team spent some time debating the appropriate staff size for a fully-scaled organization, and used that information, along with general projections for facilities and infrastructure costs, to estimate the annual operating budgets over the course of five years. At that point we were estimating that the annual operating budget for the organization would ramp up to $1.4 million by 2018.
The big question was then how the organization’s activities would be funded, and how much of that funding would come from our Foundation. We saw our Foundation continuing to be a funder and influencer in nation building, and wanted to be able to publicly say that we would spend at least as much as we had been spending on nation building through 2020 — fulfilling the decade of commitment we originally made. Looking ahead, less of our money would be spent internally on staff and consultants and more of the money would be in the form of grants to the new entity and other organizations. We also worked with our lawyers to understand how we could provide as much early support as possible without undermining its ability to fundraise from others or having the organization run afoul of the IRS public charities test.
“Tease out the implications of your decisions. For foundations, it’s really important because of the foundation power dynamics: we had the money and the resources, so at a certain point, our voice is stronger than anyone else’s. The problem comes afterward, not at the outset — it’s in the sustainability.”
— June Noronha, former Senior Manager, Native Nations, Bush Foundation
Through this work and related discussions we ended up shaping a $7.5 million investment into the new organization over a five-year period. We were deliberate about how we would structure that investment and articulated several goals to help guide capitalization decisions in a manner that accomplished the following:
- Financial structure that is enduring in perception and reality.
- Sufficient scale of the organization’s programs, grants, and the building of its own capacity.
- Bush Foundation support that would decline as a percent of overall support because of an increasingly broad base of support from other sources.
- Enable the organization to pass the IRS public support test so that it retains its status as a publicly supported charity.
Ultimately, we decided to fund the organization in the following fashion:
- $1 million in start-up support during the first year to establish working capital, mitigate the risk of underestimating one-time and ongoing operating costs, and seed funding for research and development or pilot projects.
- $5.5 million in operating support tapering over the five-year period.
- $1 million in re-granting support increasing over the same period.
We estimated that by the fifth full year of operations (2020), approximately 42 percent of annual revenues would come from other sources including government contracts, earned income, and individual, tribal, and private foundation contributions. The year-to-year specifics underneath this overarching capitalization philosophy and strategy would be codified within any grant agreements with the new organization.
In addition to this funding structure, we also considered two other options:
Endow the organization to support its work in perpetuity. This idea required additional operational funding at a decreasing rate, but also required significant fundraising from the start, as most of the capital would be restricted. This option was quickly discarded, as we felt that endowing a new organization would restrict its flexibility and create undue burden on fundraising during startup mode.
- One-time, significant investment
The second option considered, but also discarded, was to grant the entity the full $7.55 million at once, when the organization was launched. Though this would have started the organization with a very healthy balance sheet, we worried that it would cause the organization to fall behind on building its donor base, impede fundraising ability because of perception that it has all the money it needs, and minimize the need for an ongoing relationship with the our Foundation.
As mentioned above, the new organization was designed to need other funding sources, effectively starting in its second year from sources including federal, state, and local governments, individuals, tribal governments, and earned revenues.
We recognized that this capitalization structure would present a big fundraising lift for a new organization. An important point of feedback we heard in our research was that Indian country did not need another struggling nonprofit, and that longevity was an important role for Bush Foundation to play in helping place this organization in the field of philanthropy and bringing additional funders into the work. This was particularly important so that the new organization would be perceived as a resource provider and a builder of philanthropic resources instead of being just another competitor for funds.
To this end, we committed to working with the new organization to position it with potential funders in its early years both to support the new organization’s own operations and longevity and to develop it into the envisioned conduit for resources between tribes and funders. This included some initial prospect research, supporting a fundraising consultant for the new organization, and our Foundation’s CEO connecting and participating in conversations with other funders to raise support for the new entity.
Timeline: January―April 2015
The Foundation had been working with our attorneys to help guide our Native Nations work, particularly surrounding the nuances of grant making to tribal governments. That made it natural to bring these legal advisors into the mix fairly early into the process. Working with the attorneys, we followed a four-step process to determine the optimal legal structure, though it was admittedly a bit less linear than this in reality.
Step 1: Confirm our goals
- Entity structure
We wanted to establish a new, independent nonprofit entity.
- Bush Foundation influence
While our Foundation wanted to have some influence on the organization’s leadership and strategies, we didn’t wish to have explicit governance controls (e.g., a designated board seat) into the future.
- Financial support
While we anticipated funding most of the new organization’s budget during its startup and initial years, our goal was for the organization to seek out and secure other funding and decrease its reliance on our Foundation over time.
Step 2: Explore potential legal structures
The attorney team compiled a chart of the three best legal structures and requirements for each in the areas of funding, activities, grant making, relationship with our Foundation, and self-dealing concerns. The three options considered were:
- Public charity
Most flexible option regarding programming, grant making, and receiving funding from others. Most stringent requirements regarding funding diversity.
- Educational organization
Most flexible option regarding funding; most stringent requirements that it have student instruction as the primary activity and maintain a regular curriculum, faculty, and body of students.
- Private operating foundation
Effectively a fallback option if the organization could not pass the public support test.
Step 3: Vet options
While the educational organization was most flexible for funding purposes, we couldn’t reasonably say that the organization would meet this definition. We decided that a public charity was the best option for flexibility in programming, despite the challenges it may present for funding mix.
Step 4: Determine optional legal structure to pursue
Based on the considerations outlined above, we decided to structure the entity as a 501(c)(3) publicly supported charity. This structure was optimal because it provided:
- The most flexibility and autonomy.
- The ability to receive tax-deductible contributions.
- The ability to conduct all programming activities under consideration.
- The ability (hopefully) to meet the required 10 percent facts and circumstances test.
Other legal steps
In addition to determining the legal structure of the organization, we also worked with the attorneys to draft and file the following paperwork to incorporate the entity:
- Articles of incorporation with secretary of state
- Federal and state tax identification numbers
- Liability and directors and officers insurance
- State attorneys general registration to solicit charitable contributions
Legal agreements between Bush Foundation and new entity
Our Foundation entered into a memorandum of understanding (MOU) with the new organization once the founding board was seated. The timeline for the MOU was at least through the end of the 10-year commitment, which was effectively five years from the launch of the new organization, though it could be continued for longer by agreement of both parties. The MOU included the following components:
- Partnership background and goals
- How the partnership will operate
- Roles and expectations of each party
- Definitions of success
- Grant agreement process
- Legal requirements including termination, conflict of interest, intellectual property, relationship, assignment, and authority.
“Negotiating the accountability measures in the initial grant was awkward, as NGC didn’t have any staff yet. Over time, both sides worked together to adjust expectations, but in hindsight, we might have been more vague or flexible from the start so NGC didn’t have to do things before it was really ready.”
— June Noronha, former Senior Manager, Native Nations, Bush Foundation
In addition to the MOU, the Foundation entered into its first grant agreement with the new organization in October 2015, which was before any staff had been hired at the new entity. Because the new entity had not yet filed for or received its public charity status, this grant was made as an expenditure responsibility (ER) grant.
Though the initial plan (detailed in the capitalization and financing section of the report) called for our first grant to the organization to include a $1 million balance sheet infusion, we realized that expenditure responsibility grants require reporting by both the grantor and grantee until all funds are expended. Since this balance sheet infusion was intended to be fully spent in the near future, this would tie both organizations to ER reporting for the indefinite future. In light of that, we waited until the new organization had received its IRS determination letter, and then made the balance sheet infusion using a normal grant.
Communications and Engagement with Tribes
As talked about earlier, ensuring that there was sufficient communication and engagement with tribes throughout this work was one of our Board’s primary concerns. We’d spent years building relationships with tribes and felt an urgency to uphold their hard-won trust. To help address this concern, we increased the time, energy, and resources we put toward communications throughout.
At the onset of the project, our communications strategy was to engage individuals closest to our work through interviews, focus groups, and advisory roles, allowing them to provide feedback, help shape the work, and stay connected as it progressed. That was easier to do in the early stages of work, during which we were intensely seeking out and synthesizing a lot of different perspectives on what we should do. It got harder, and in hindsight, we should have been more intentional about communications when we moved into the later stages of organizational structure and business planning.
“You can’t get complete buy-in. That first round of interviews included people who were not totally on our side. That was the best possible sort of way that we could elicit input into the work. As it got narrower, in retrospect we might’ve broadened it a bit. But being part of it and understanding how difficult it was, I don’t know how realistic it was.”
— June Noronha, former Senior Manager, Native Nations, Bush Foundation
In spring 2015 we reached an important and nebulous juncture that lies between planning and creating. We decided to contract with a communications firm that could take on the job of forming a communications strategy and suite of assets that could transfer to the new organization and give it continuity and capacity.
We conducted an RFP for a public relations/communications firm to develop and execute a plan to announce the creation of Native Governance Center (NGC) and create related communications assets. The firm we selected was Native-owned, from the region, and had strong experience doing this type of work.
The communications firm did a number of things to help engage with Tribes and share the appropriate level of messaging publicly:
- Developed an FAQ sheet about the decisions made and timeline for launch.
- Facilitated an inclusive, engaged naming process. This included interviews with staff and board members, focus groups with Rebuilders, and a vetting process with the new board of directors.
- Developed a Native Governance Center brand and related materials.
- Designed and launched the Native Governance Center website.
People and Operations
One of the biggest success factors in this work was the extraordinary commitment on the part our staff leading this work was to get to a good answer regardless of the implications for themselves. Woven throughout this work were hard questions about what would happen to our current Foundation staff that led and supported our Native nations work. Recognizing the apprehension and concern an unknown future created for our people, we addressed this awkwardness and put financial and other commitments to them in writing. That made a big difference both as an acknowledgement, and because laying out financial commitments released some of the tactical stress about needing to be job hunting for something different while we were trying to make this huge spin-off happen.
We offered transition support, executive coaching, and other services to employees as they navigated the change. One staff member was able to secure a new position at another foundation we often partnered with. We worked with another team member to design a role in which she would stay with our Foundation through the transition and initial startup of the new organization, to also help shape our own strategy working with Native nations going forward.
To help smoothly transition our relationships in Indian country and other communities, we also created a loaned executive role for the Native Governance Center, under which our Native nations vice president spent a year working as an advisor alongside the new organization’s executive director. This was designed to support the new organization in its startup, and help ensure a smooth transition for all program participants, partners, and relationships.
Staffing the new organization
Our business planning work sketched out a staffing structure to support the roll-out and growth of the Native Governance Center, knowing that it would and should change as the founding executive builds a team and the organization finds its own path. We estimated that, once up and running at a steady rate, Native Governance Center would require approximately seven fulltime equivalent staff, complemented by limited outsourced functions.
Systems and infrastructure
A joint Bush Foundation/CLA staff team created a plan for and began building out operational infrastructure so that the founding executive director had a baseline of infrastructure, technology and systems in place and could focus on working with the board and building a team. CLA was able to either directly provide or procure and coordinate functional capacity in accounting, human resources, technology, facilities, etc.
Since the organization was initially designed to serve 23 nations sharing the state boundaries of Minnesota, North Dakota, and South Dakota, we evaluated a lot of location options. Ultimately we decided that the Minneapolis-St. Paul metropolitan area was preferable for launching the organization while still encouraging executive director candidates to apply who may (or may want to) live and work elsewhere in the region. Our considerations included:
|Gives location “profile” of major metropolitan area.
||Less proximity to tribes.
||Talent is elsewhere and may not want to move to the Twin Cities.
Unbiased regarding tribal affiliation.
|Perceived lack of independence from Bush.
|Better flexibility and positioning to grow or go national.
||Most expensive space and people.
|Easier transition of work from Bush and Native Nations Institute to the new organization.
|Larger talent pool.
We also considered a fully virtual environment but ruled it out because of the difficulty in building strong organizational culture, the challenges of managing a fully-virtual staff, increased complexity of transitioning existing work, and because a virtual model is not necessarily a cost-saving play. Lastly, the work itself requires a high degree of face-to-face interaction to build understanding, trust and rapport.
One additional benefit of the Minneapolis-St. Paul metropolitan area primary location was the opportunity to co-locate with another local private foundation which does work in Indian country, and who was willing to make available excess office space to Native Governance Center. This was a great opportunity for the new organization to have some separation from our Foundation and to create new relationships with another aligned organization.