Do We Do What We Say We Do? Cognitive bias in the boardroom

A big part of my job as a consultant is discerning the big picture in things. Working with boards, two big picture factors play an outsize role in diminished governance outcomes. The first is confirmation bias. Confirmation bias is, you will remember, the tendency to seek out, favor and recall information that confirms existing beliefs. As such, it is a prime component of erratic inductive reasoning.

The second is what I call normative bias. That is a bias to favor the assumption that current and future events will tend to preserve and confirm the status quo. That tomorrow will look like today. That students in the next decade will face the same challenges as students in this decade.

That is, if you can’t see change, it most likely isn’t happening. Or, that the world leans toward stasis rather than change. And this factor is particularly applicable as a component of considering some localized issue at hand where the big picture is easily obscured by the demands of the moment. Think of it as the error of assuming past stock market winners will be future winners. Think of it as viewing any given infrastructure as immutable and not prone to degradation or obsolescence.

Together, these two biases lead good boards astray. They lead board to ignore threats and opportunities in the interest of preserving the status quo. On the face of it there might seem to be nothing wrong with such conservatism of governance. I do not discredit the term “conservatism” here in the least. The role of a governing board is to govern an organization in trust for the greater community in the service of a relatively immutable mission. That is as it should be. Reckless—and feckless—board governance is anathema to the continuity of a needed service.

But confirmation bias, especially collective confirmation bias, or groupthink, is endemic to board culture and decision-making. It begins with overbroad notions of collegiality, of knowing “one’s place,” of not rocking the boat; there are so many ways American idioms express the concept—precisely because it is so commonplace.

Confirmation bias tells us that since we serve an organization that does good work, the evidence tells us that we’re doing good work. Statistics are quoted, testimonials are heard, anecdotal evidence is convincing…or…the statics are not germane, the testimonials are pure emotionalism, and the evidence not actually evidence. What we are hearing in such a scenario is confirmation bias at work.

Confirmation bias gets in the way of realizing that we are underserving entire sectors of the community, that we are training for the wrong jobs, that we are not tracking our former enrollees (all too often inaccurate to call them graduates) for outcomes; all of these circumstances are serious business, but in the face of challenging notions, studies show convincingly that confirmation bias is invincible unless countered.

And what of normative bias? Normative bias says that change that happens slowly isn’t happening. Global climate change might be the poster child for this one. But it happens at every intersection of personal and collective experience. Baby boomers are not aging. Suburbs are not growing more diverse. College tuitions are not becoming unaffordable. White collar jobs are not disappearing.

In the rear view mirror, it all seems so obvious. Half of all Americans worked in agriculture in 1890. Forty percent of Americans worked in high quality manufacturing jobs in 1950. So we see titanic forces are obscured in the slowness of their conquest. It happens all around us every day, in nearly every neighborhood, but all to often we don’t know what we’ve got—or don’t have—‘til it’s gone.

When you pair confirmation and normative biases, the errors of inductive reasoning can be compounded to an astonishing degree. We develop an entire sector, let’s say the community college sector, that tells itself and the world that it is the go-to choice for job retraining and access to education for the underserved.

Yet we see that millions of jobs go unfilled every year in regions where un- or underemployed workers are legion and the community college sector has a strong presence.

The educational-industrial complex, to put an ironic twist on it, has not done a good job of providing meaningful retraining for the good jobs that actually exist. Why? Because we so busy doing a good job that we didn’t have room, time, or resources to do the job that needed to be done?

Boards need to ask themselves one question: do we do what we say we do? And they need to demand answers that are backed up by rigorous empirical methods that are as free of cognitive bias as possible.

Do we do what we say we do? That is the question. Let’s start there.

 

Stick with Mission in Tumultuous Political Times

While current claims that the USA has never been more divided may be a tad hyperbolic—the Viet Nam war era comes to mind—these certainly are polarized times, and they may become more polarized in the months and years ahead. Straddling political divides to support higher education philanthropy is difficult when the political fracture of the day is top of mind for colleagues and community members alike. Your own political feelings may careen from despondent (or triumphant) to angry in the course of a single tweet. That’s the way of the world right now.

My experience tells me that the best policy is to lead with mission in polarized times. And our mission is simple: helping students enrolled in higher education. When impolitic messages are expressed you can pivot with a statement like, “My concern is with our students, and one thing I know is they will need more resources, support, and superior education experiences to make it in this world.”

We are lucky to have a mission as inclusive as students in higher education because our mission is nearly universally respected by people of all political persuasions. That allows us a little breathing room in divided arenas as long as we keep the focus where it needs to be, on the mission we serve.

I know it can get complicated. I have spent many years of my life in the company of CEOs, wealthy donors, small business owners, and successful professionals. I have heard thousands of directly political assertions that I have had to either sidestep or respond to with well-crafted noncommittal statements of one sort or another. It can wear on a person. Yet, we cannot make assumptions about the political leanings of a prospective or active donor. Money comes in all political stripes.

With board members, we might learn to encourage a little more comity (not comedy, although it bit of levity might help) in awkward times. I have had the experience of working with boards that shared tacit political biases, and I don’t think that’s right. I think the need for board diversity alone argues against that. When I see a board that leans 90% toward an identified political party, that’s a problem.

People give where they feel their contributions make a difference—and they give, and serve, where they feel welcome. In sharply divided political times a board chair or president may need to—rarely, we hope—ask a group to table remarks or a discussion or continue it outside of any institutional context.

But foundation executive directors and development officers may sometimes need to respond to unprofessional remarks by stifling themselves in the interest of promoting overarching philanthropic goals. I am not talking about hate speech, overtly offensive racist or misogynist remarks here. Those need to be documented and reported to the proper institutional authorities, because they directly threaten the mission of the institution. Thankfully, those comments as heard in a professional context are rare in my experience.

In these highly charged times it can be excruciating to stifle oneself. It isn’t like we learned the fine points of rational discourse only to suffer the slings and arrows of brutish politics in silence. But work is work. We are paid to cultivate gifts to the institution to further its mission, and that must be our higher calling, at least for the 10 hours a day we are on duty.

Off duty, especially in a small town, can also be a minefield. And while we do not take the vows of political chastity journalists must adhere to, high profile political engagement carries its own career risks. That is not fair, but there it is.

It is assumed that development professionals will work with donors of divergent political views. Some of those will be strident. We need to lead with mission at all times in the face of charged political emotion. The more we can promote the comity of big-tent philanthropy, the better chance we have of preventing push from coming to shove in our professional lives. But sometimes it arrives anyway. Perhaps that is a topic for another day, one that comes under the header of crisis management.

In the meantime, we may be in for heightened political tensions for the long haul, so setting positive, well-framed precedents right now is imperative. And leading with mission is never a bad thing. It is a proud tradition; one that can serve to unify divided communities in difficult times. I wish my fellow practitioners the very best in that endeavor.

 

 

Sidebar:

“Comity,” according to Merriam-Webster

  • 1
a : friendly social atmosphere :  social harmony <group activities promoting comity> <bipartisan comity in the Senate>
b :  a loose widespread community based on common social institutions <the comity of civilization>
…
  • 2
: avoidance of proselytizing members of another religious denomination

 

“Stand for your mission,” is an image belonging to standforyourmission.org. Check it out.

“Working Class Colleges” Lead the Way in Educating for Upward Mobility

New York Times opinion writer David Leonhardt’s article, “America’s Great Working Class Colleges” is a must-read for people who care about higher education in America. It concerns a recent study of the ability of colleges to launch students from the bottom fifth of American earners into the top three-fifths, a pro-forma measure of upward mobility toward the middle class.

The findings: less selective institutions such as City University of New York do a better job of helping graduates move up the economic ladder than do selective and elite institutions.

It includes the astonishing finding that “the City University of New York system propelled almost six times as many low-income students into the middle class and beyond as all eight Ivy League campuses, plus Duke, M.I.T., Stanford and Chicago, combined.”

Leonhardt asserts that deep declines in state support for working class colleges cuts at the heart of their ability to outperform, even as they beat better-funded institutions at a core element of their missions. That is, they provide the most help to the students who need it most.

Why can’t America’s more selective universities and colleges replicate the success of so-called working class colleges in launching graduates into the middle class? And why aren’t more community colleges taking on the challenge in a more focused manner?

So-called “working class colleges” offer more learning supports including “freshman experience” programs that reinforce how to learn, cohort identification and persistence. The “elites” stick closer to the sink-or-swim model. Open access allows many more students who are only marginally qualified to succeed access to college, yet these institutions still outperform the “majors.” It comes down, I believe, to a comprehensive program of financial supports, cohort supports, evening classes, faculty commitment to teaching and a learning-centered posture on the part of these colleges.

In a moment when the nation considers infrastructure as a potential spending priority, I would argue that this type of educational infrastructure should become a public investment priority. And for those who complain about rising tuition, how about correlating that to declining state support for higher ed?

As to the role of community colleges in student outcomes, while they generally do a laudable job, on par with the great working class colleges, in serving their least affluent students, they persist too often in viewing students as à la carte consumers, and do not take sufficient responsibility for student outcomes.

It’s not that hard to survey student intentions at the outset, and for those students who identify their goal as to use the community college as a primary provider for their first two (or more) years and then matriculate for the final two (or more) years it will take to earn their four-year degree, these colleges need to first track outcomes during the two years those students are on campus and beyond to learn what works. That is to say, they should use the longitudinal methodology of The Equality of Opportunity Project’s study in measuring their effectiveness.

Increasingly, two-year colleges are recognizing and responding to the challenge, but unless they can make their own case based on objective data, they will not be competitive in making the case for reversing much of their own declining state support.

If we want to avoid the creation of a permanent two-track society—the effects of which are becoming strikingly apparent at this very moment—we had better get in gear for education-based upward mobility again. Better funding colleges like City College, the University of Texas at El Paso and California State Los Angeles would be great way to start.

As a consultant in the field of philanthropic funding for higher education, I know that the great class divide is actually deepened by the tendency that donors have to give to high-prestige institutions. That reality increases the demand on the elites to do much better in raising the bar on educating the nation’s poorest students.

When “Educating” is the Same as Propaganda

This originally appeared on Steve Klingaman’s Open Salon blog.

A 2011 report that the IRS sent letters warning of possible gift tax liabilities to big donors to 501(c)4 nonprofit social welfare organizations shines a bit of light on a much-abused segment of the nonprofit world. Social welfare organizations have become the recipients of hundreds of millions of dollars in recent election cycles, and all indications are that this is just a drop in the bucket.

The New York Times reported on May 12, 2011 that the IRS sent letters to five donors to 501(c)4s informing them that their contributions may be subject to gift taxes because the groups were political in nature. The tax rate is hefty — 35 percent.

Traditional charities, known as 501(c)3s, are eligible to receive tax-deductible gifts. In exchange, they are enjoined from substantial political participation, and the participation to which they are entitled must be reported to the IRS. Social welfare organizations on the other hand are entitled to spend money to influence legislation related to their missions. They are, however, enjoined from supporting or opposing specific candidates. It is this area that has turned increasingly cloudy in the post-Citizens United, anything-goes era.

In a time in which billionaires like David H. Koch may donate millions to Americans for Prosperity to influence political races, the issue increasingly matters. What’s more, these contributions may be made anonymously, so, for example, corporations can effectively launder their political contributions through (c)4s without risking alienating their customers.

But are (c)4s being abused in a wholesale manner? If you look at the IRS rulebook for (c)4s, the answer appears to be yes, at least if one adheres to the historically accepted definition of the term “social welfare.” Here’s how the IRS restricts the political involvement of this class of nonprofits:

Seeking legislation germane to the organization’s programs is a permissible means of attaining social welfare purposes. Thus, a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status…. In addition, a section 501(c)(4) organization that engages in lobbying may be required to either provide notice to its members regarding the percentage of dues paid that are applicable to lobbying activities or pay a proxy tax. For more information, see Lobbying Issues.

The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditure it makes for political activities may be subject to tax under section 527(f). For further information regarding political and lobbying activities of section 501(c) organizations, see Election Year Issues, Political Campaign and Lobbying Activities of IRC 501(c)(4), (c)(5), and (c)(6) Organizations, and Revenue Ruling 2004-6.

Lobbying is okay, thus the lack of a tax deductibility of the gift. But things get murkier in the second paragraph: “The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.” Political advertising that opposes candidates for public office is routinely cloaked in a thin layer of issue-related language while the primary intent of the messaging is clearly apparent — the defeat of a particular candidate, or group of candidates. This type of guerrilla messaging is very much the primary purpose of most political (c)4s. If the goal is to take back the Senate, the tactic is to defeat a number of “particular candidates.”

The IRS intent regarding the missions of (c)4s is pretty clear. IRS rules state:

To be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements).

One example of such a mission offered by IRS rules is an organization that operates for the benefit of a class of rental tenants. Nonetheless, terms like “common good” and “general welfare of the people” are pretty broad, and it’s easy to see how they form the loophole through which broad political participation has been masked by such generalities.

Here’s what it comes down to: “We promote the general good by advocating a moratorium on ever raising taxes again, and by implicitly attacking any party that would raise them. And we do it by educating the public.” That’s pretty much how political and ideological (c)4s operate.

All of their political messaging is characterized as education. I have reviewed (c)4 tax returns of politically inspired groups; this is how they tend to characterize their spending. So what is the difference between educating and advocacy or, more to the point, propaganda? That is what the IRS should determine with sufficient clarity to define actual practice in the field.

A grassroots (c)4 group that attempts to improve living conditions for a broad class of renters by occasionally participating in the legislative process, introducing model legislation and lobbying for specific bills, is a far cry from the political machines (c)4s have become. If promoting social welfare is to be synonymous with pure politics, then let’s change IRS regulations to say so.

The brouhaha over gift tax applicability to (c)4 gifts will either be settled in tax court or by legislation. It is a virtually a foregone conclusion that aggressive IRS actions toward (c)4 donors will result in Congress passing an exception to the rule that would allow big gifts to circumvent any tax liabilities. So much for the extra revenue IRS agents were apparently eying. But the larger question about political abuses of the structure of nonprofit social welfare organizations is one that should be scrutinized if this part of nonprofit law and practice is to have any ethical moorings in the political process.

[This article has been edited for brevity by the author since original publication.]