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Avoiding 501(c)(3) Founder’s Syndrome

Founder’s syndrome.  It affects nonprofits and for-profits alike.  And it can be crippling to any organization.  Understanding what it is and how to avoid it is crucial to the future of your 501(c)(3).

Taken from that most-reputable of sources, Wikipedia, founder’s syndrome is defined as, “a pattern of negative or undesirable behavior on the part of the founder(s) of an organization”.  While that can be true, we find that most cases of founder’s syndrome within nonprofits simply involve a founder with too much influence.  In plain English, it means that the universe revolves around the founder…and not in a good way.  Here is an example of the way it usually works:

Sam was an entrepreneur.  In this case, a social entrepreneur.  Sam had a passionate vision to start an after-school mentoring program for troubled youth.  Early on, Sam was able to assemble a board of directors and a pretty good corp of volunteers.  Due largely to Sam’s energy and vision, the organization experienced immediate success and grew rapidly.  The organization became well known in the community and developed a good reputation.  The members of the board pretty much deferred most of the governance responsibility to Sam.  After all, it was his baby and he was making it happen.

A few years passed and the organization eventually began to plateau.  Growth stalled, program development gave way to program management, and volunteers became harder to keep.  Sam was still at the helm, but had reached the limits of his creativity and management skills.  One thing that had not changed was Sam’s drive and charisma.  A few of the board members recognized that Sam’s influence had become too dominant for the future of the enterprise, but didn’t want to upset the apple cart.  Other board members were oblivious or didn’t care.

Unexpectedly, Sam died of a massive stroke.  The board made an effort to salvage the situation by installing one of the long-term volunteers, Sandra, as the program director.  But, given that Sam had done most everything management-wise, Sandra was ill-equipped to simply step into his big shoes.  The board pretty much put it all on her shoulders since their own involvement had been token to begin with.  The end of the story is pretty obvious:  The organization began a rapid decline, Sandra resigned within a couple of months in frustration and the board, with no other recourse, closed the doors.  But, it didn’t have to end this way.

Author Stephen Covey, in his classic, Seven Habits of Highly Effective People, lists as one of those habits to “begin with the end in mind.”  In the scenario above, Sam would have done well to honestly inventory his own skill set, purposefully recruit those who shared his passion and who possessed skills he did not.  In addition, he should have insisted on board involvement and input by establishing a culture of contribution and commitment by practicing delegation of responsibility.  Would those things have guaranteed a successful transition to a post-Sam world?  No.  But it would have set the stage to make it as likely as possible.  At the least, the organization would have been much healthier and positioned for success.

For those founders who are control-freaks, the problem is much more acute…and solutions much more difficult.  Potential board members and volunteers are wise to consider such before they agree to come on board.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 15 Comments
  1. This article assumes that the founder syndrome is a problem because the non profit organization fails. Why not just say to the failing non profit, "thanks for the memories" and be on our way. Yes, we care about the kids. If only things were done differently or if someone would just do something to help, the the kids would be better off. But those complaining of the loss of the non profit are not stepping up. But that is ok. Perhaps those complaining should start their own non profit like Sam did. If Sam liked to run things in a controlling way, so what? He made the world a better place. What are we going to tell the future Sams of the World? Make your non profit sustainable after your death or don't bother starting it in the first place. Is it not ok if someone really doesn't like sharingn responsibility yet still wants to start a 501c3. People say "but it could have been better if only . . . " Perhaps Sam knew the implications of his managment style, but simply didn't want to run things that way. If its a problem, then someone elese could have stepped up and started a new non profit to replace Sam's old one. We have to be more accepting of temporary things unless we are willing to jump in to do something about it, which apparently nobody was in this case, even the people who are complaining.

    1. Is it not ok if someone really doesn’t like sharing responsibility yet still wants to start a 501c3?

      No, it isn't OK because applicable federal and (most) state law prohibits dictatorial control over a 501c3 in order to protect the donating public and to ensure a public/charitable purpose is being pursued. If Sam wants to be king, cook and chief bottle washer, that's fine. He should stick to doing his idea as a unincorporated project or simply be a for-profit enterprise. Tax-exempt status is neither appropriate nor allowed in his case.

      BTW…Sam is fictional, though the circumstances of his story are common.

  2. We have a new organization that is floundering. The Board was enthusiastic until a couple started doing things on their own. The President spends money, put up a trashy website, cannot keep records, will not replace a senile treasurer, and does it all without aprising or discussing with the Board. Some of us fear being accused of malfeasance at some point. Does this happen with small orgs?

    1. Unfortunately, it happens all too often. You basically have 2 choices: 1) resign and get as far away from this thing as you can or, 2) use the means available to you under the bylaws to correct the problems. If a majority of the board feels the way you do, the only thing stopping you all from taking control of the situation is your willingness to do so. You have to decide if it is worth the battle.

  3. I'm just now venturing into researching how to start my non-profit when I discovered this very informative site. Thank you!

    My question is to Casey (or anyone else who can answer it); You mentioned you run your charity alone. Do you not have a BOD? I thought that was required in order to establish as a 501c3.

  4. This isn't just a theoretical idea. I've been on the board of an organization with founder's syndrome. It wasn't fun for anybody, including the founder who was overwhelmed, frustrated and felt attacked whenever anyone suggested an alternative plan to his. Unfortunately, a potentially great organization with a program that could have easily scaled to a national level, was left floundering for support and a plan.

  5. Greg is right. What Casey is describing (I say with support and appreciation for her tireless and no doubt important work) is what I think of as (and I should come up with a gentler name for it, but here goes…) vanity organizations. A lot of organizations, most small, some not so small, have causes or founders who have not been able to attract enough committed "investors" or "true fans" to build a movement…and then to build an infrastructure that can sustain program and generate future growth. They are (at their essence) one-person shops. This is different work that requires different kind of leadership to accomplish (or, probably most effectively, a shared leadership structure). I don't mean that this work doesn't need to get done. I do mean that if a core group of invested activists cannot be engaged, something serious is missing. These kinds of organizations can be like sole proprietorships that die when the business owner stops working at that business. But they are not sustainable models that will be able to carry on the work, creatively and dynamically into the future.

  6. Maybe Sam is not the only problem, often only the founder is "really engaged with the nonprofit mission".
    Most of employees wouldn´t give the best of themselves because of a lack of engagement between them and the mission of the organization. They only see the entity as work. What do you think?

    1. I have to say that if no one else is engaged, it is a failure of leadership on a scale much larger than just founder's syndrome! Failure to recruit, failure to inspire, failure to cast vision…failure all around. Unless I'm missing your point, the scenario you describe is nothing short of disastrous.

      1. Man, Greg, that's brutal. Often nonprofits start small. And depending on the mission, frankly, not a lot of people are interested, particularly if the work is not glamorous and easy or popular. Even finding volunteers that last a few months is difficult if travel is involved, and if the donations are not enough to pay salaries, forget it. Saying the founder is failing if they don't "inspire" volunteers and board members maybe true sometimes, but certainly not always. I've run my charity for 15 years by myself. It's hard dirty work, and since it involves animals, deeply underappreciated in our society. I've worked hard to inspire an understanding of animals and their needs, and an awareness of them as living creatures who deserve better than choices of death, but have had only temporary success, which dies when the school year starts, or something more interesting, convenient and clean comes along. I guess I'm longwindedly saying that I disagree with you…

        1. Thanks for the input, Casey. Certainly some situations are more challenging than others. But, in the context of founder's syndrome, the fact remains that if a founder cannot duplicate and supplement themselves, the organization will not survive long term. I'm not saying great things cannot be accomplished. They will just be short-lived.

  7. The problem can be solved quite easily. Sam has had to duplicate himself as much as he can and make sure that this duplicate is able to make duplicates of either himself or the one true original in the first place. The technique of the principle of exact multiple duplication is the most important aspect of company administration.

  8. Here is another great book that covers the topic well. Thank you for the reminder.

    Goldsmith, Marshall and Mark Reiter, What Got You Here Won’t Get You There: How
    Successful People Become Even More Successful, New York: Hyperion, 2007.

    Tom Hamilton

  9. I am a founder of an Alumni organization, I feel this in our organization(6 years old) This is the reason why I advocate new and young member alumni to help in the manangement helm. Thanks .

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