Bright people working together to achieve laudable goals in nonprofit organizations would seem to be a recipe for harmony. Yet, all too often these organizations fall victim to energy-sapping internal disputes. Governance, the ‘g’ word, is very much on people’s minds. Everyone is seeking a silver bullet that will make the policy and decision-making processes of these organizations work well. Yet, there is no ‘single’ answer that will work for all organizations. Rather, there are a series of guiding questions that will assist individual organizations to develop governance processes that work, can be adapted to new realities and that meet the standards of accountability, transparency and responsible partnership.
Governance is about how organizations make decisions and who is accountable for the results. Boards may make major policy decisions or minor administrative ones. Here are five good ideas common to all nonprofits to the common challenge of good governance.
1. Good governance is always a work in progress that must be tailor made to the specific character of each organization
A nonprofit organization is not static: the external environment may change, funding may become easier or more difficult, or the people-mix within the organization may alter. All of these factors can affect governance. Never take your governance situation for granted. The best governance structure for your organization depends on such factors as: the nature of the service, the age of the organization, and the size and culture of the organization.
Look to other organizations of a similar size, age and mandate for governance structures which can be imported into your own organization. It is good practice to have an annual appraisal or review on how well your organization makes decisions. Engaging an outside facilitator to run the meeting may also be useful; the facilitator does not have to be a professional (and expensive) consultant; he or she can be drawn from a peer organization network.
2. Good governance is proactive, strategic and embraces accountability
Good governance is proactive, not reactive. Benevolent neglect is often the origin of most governance issues. A board that is dealing with minutiae is a board that does not understand its role. Even a working board must be strategic, deal with issues in an accountable way and most importantly, look ahead to the next stage of the organization. A board does not have the ability to run the organization on a day-to-day basis.
Board turnover is important. At the annual review, the executive director should be bringing a “state of the union” discussion paper to the board highlighting changes to the external environment and raising opportunities and key questions to be considered by the board.
The chair of the board and the executive director of the organization need to have a strong working relationship. The responsibility for smooth board meetings resides with this group.
3. Be realistic, a matter that is seen by one person to be an organizational concern is seen by another person as a conflict of interest. Interest conflicts come in many guises and their early management is everyone’s responsibility
Some conflict of interest issues are very clear, e.g. locating your new office premises in your sister-in-law’s building. Organizations get into trouble for two reasons: one, they don’t have a set of conflict-of-interest policy guidelines (issues such as competitive bids, open advertising, familial connections). Usually these guidelines are established by a risk management committee of the board. Two, either through naivete or power, there are no boundaries between personal and organizational decisions, for example a founding board member who has been a board chair for the entire history of the organization. It becomes difficult to challenge this, largely out of a climate of fear.
There is a third type of conflict of interest which can often be the most benign threat that a board deals with. This often arises within an organization with a working board, where a key board member is also a key volunteer in part of the organization. When issues arise at the board meeting, the board member strongly advocates for the volunteer area in which he or she is involved. Now one part of the organization has a clear advocate on the board with the result that the budget process or other decision-making process are undercut. Eventually the situation undermines trust and credibility in the organization. How do you address this proactively? There is no other way to do this other than the executive director or the board chair to have a direct conversation with the individual.
4. The development of a strong management team and provision for leadership succession is a recognized board priority. Equally important is the development of leadership capacity and the provision for board member succession within the board itself
Using a garden analogy, “sow the seeds and tend the garden”. Nurturing the talent of board members can often be neglected due to ‘founder’s syndrome’ – a founding member allows the board to become fossilized. Develop a board policy that limits the term of a board member as well as the term of executive positions. The position of board chair in particular needs to be developed – to understand the culture of the organization; to understand the organization’s issues; to understand and be trusted by key staff of the organization. It is very difficult (and perhaps risky) to have a board chair ‘parachuted’ into the board without any prior experience. Hopefully the board chair will have previously had an experience of working as a board member, perhaps as the chair of a board committee.
The working relationship of a board chair and executive director is always a negotiated relationship. Together they should be responsible for board membership development and board orientation.
5. Use them or lose them! The attraction and retention of strong board members depends on a board’s ability to productively engage such people in a meaningful, satisfying manner
It is the responsibility of the board chair and the executive director to ensure that board members are productively engaged. The best way to do this is in the preparation of the board agenda. Meetings should end on time and reports should be timely otherwise board members feel they are being manipulated and asked to rubber stamp decisions. Volunteer time is a scarce commodity and should be managed accordingly; if a board member’s time is not used well, it will go elsewhere. Make sure that board members are engaged in meeting discussions; not all agenda items should be reports and information.
Use a process observer – one board member every meeting who has the responsibility for observing the meeting and reporting at the end of the meeting about what worked and what didn’t work.
Use focus or theme sessions at least quarterly, organized around an issue that is confronting your organization. This gives board members an opportunity to be proactive and provide opinions; it also gives an opportunity to bring in other staff members to offer their expertise or an outside observer to provide an educational opportunity.
Get the chair active and involved in the organization. There are many learning opportunities on how to be a effective board chair and many good books on the subject.
Good Resources on Board Governance
How Should Boards Address Conflicts of Interest? in Great Boards: the online newsletter for healthcare boards, Winter, 2003.
Eyes on Governance: beyond Board structure and Committees, Institute of Corporate Directors, The Globe and Mail, November 28, 2004, pg. B6
Making Time For Good Governance, Douglas Macnamara and Banff Executive Leadership Inc., Leadership Acumen, Issue 11, August 2003.
Building Better Boards, David A. Nadler, Harvard Business Review, May, 2004. pp.102-110.
The New Work of the Nonprofit Board, Barbara Taylor, Richard Chait and Thomas Holland, Harvard Business Review, September-October, 1996. pp. 4-11