Designating a ‘Lead Trustee” Can Help Boards Improve Their Operations

Designating a ‘Lead Trustee’ Can Help Boards Improve Their Operations

Originally published by the Chronicle of Philanthropy, June 2, 2011, p. 34

By Eugene H. Fram

Few nonprofit boards do a great job of overseeing their organizations. Both nonprofit board members and CEO’s share that concern: Asked to rank their performance with academic-style grades by the nonprofit group BoardSource, chief executives gave their boards a C+, while board members gave themselves a B.

Chief executives said the boards did an especially poor job (C grade or worse) in raising money, handling community relations, recruiting new board members, and designing strategy.

These results are not surprising. Many board chairs are overcommitted and overextended. What’s more, board chairmen don’t have much time for formal lessons. They learn on the job, but as soon as they get the hang of the role, they often rotate out of the top position, most often in only a year or two.

Adding to the challenge are persistent problems at nonprofits: Most groups don’t focus much on evaluating whether the organization is effective, they often face crises, and staff members don’t spend much time ensuring that board members are communicating except when the organization is facing a crisis.

Many of the challenges facing nonprofit boards could be averted if organizations borrowed an idea that the business world has been trying.

At companies whose boards are led by a chief executive or other management official, companies have nominated one independent director as a “lead director.” That person’s main role is to improve the performance of the board and strengthen relations between the chief executive and the board.

In addition, the lead director calls a meeting of the board at least once a year without any of the board members who represent management present.

The use of such directors became popular as a way to deal with the public concern about the business world that prompted passage of the Sarbanes-¬Oxley law in 2002. That legislation spurred the New York Stock Exchange to enshrine the idea of lead directors as a way to show that a company was well governed.

Given how time consuming it is to serve as a nonprofit board chair, especially of a complicated organization like a university or hospital, it seems logical to empower another volunteer to formally fulfill some of the responsibilities expected of a board chair.

A lead director can assist the chair in the day-to-day needs of leading a board (while not micromanaging) and to assist in rehabilitating a dysfunctional board. This is especially important when the chair has little management or board experience. (Example: a concert pianist chairs a social-services board.)

At first glance, adding a lead director to the structure of a nonprofit board seems like formalizing a position in a way that could impede the relationship among the chair, the CEO, and other board members.

However, the lead director should be viewed as just the opposite, as the business world has demonstrated. The lead director can help the CEO work more effectively and efficiently with board committees, especially in driving the work of the strategic-planning groups.

What’s more, the lead director can be an additional consultant or mentor to the CEO, especially when the board chair is unavailable. Because the lead director would help the board run better, this move could also do much to build morale at nonprofit groups.

Among the other benefits a lead director would offer:

Speeding the consensus process. Reaching timely consensus is a problem for many boards. Often, nonprofit-board processes read like complex legislative bylaws, such as requiring several discussions, over time, before a proposal can be voted on. The lead director could serve as an advocate for processes that enable the group to reach consensus in a timely fashion.

Making strategy, not operations, a focus for discussions and decisions. Only about half the boards in the BoardSource study received top grades for this significant responsibility. Minutiae seem to be endemic to the agendas of nonprofit board meetings.

As a result, it is not unusual for strategy issues to be postponed. A lead director could be asked to improve nonprofit board productivity by making certain that strategic decisions are the focus of timely and directed discussions.

Monitoring the quality and quantity of management information flowing to the board. Board members of both businesses and nonprofit organizations have been encouraged to contact people outside the executive suite to ask questions and to seek added insights.

How board members make these contacts needs to be prescribed by board policy, and the board chair and the CEO need to be well informed about potential opportunities and concerns arising from the meetings. The lead director can serve as the monitor of these communications.

Interceding with difficult or poorly performing board members. Dealing with these types of board members is a perennial problem for both nonprofit board chairs and CEO’s. Some examples: the committee chair who never calls a meeting, the one who calls too many meeting without any problem resolutions, or the devil’s advocate who has lengthy statements at every meeting about every issue. The lead director can be available to assist the board chair and the CEO in attempting to moderate the impact of difficult board members.

Monitoring and coordinating committee activity. The lead director would be an ideal candidate to head strategic-planning committees or special committees of strategic importance, since this is a board function that often does not receive the proper attention.

The lead director also needs detailed knowledge about emergency plans for a temporary CEO succession, about merger issues, and about crisis-management planning.

While routine ad hoc committees do not need the lead director’s attention, he or she should be familiar with the decisions that might make a significant difference to the organization.

Rehabilitating dysfunctional boards. Nonprofits often select their board members from a variety of constituencies. In addition, nonprofit boards sometimes have dozens of members, often located in different parts of the country.

Occasionally, these structural issues can make it hard to gather a quorum and cause strongly divided opinions on budgets, strategies, and leadership personalities.

The lead director can assist the board chair with communications, with resolving contentious issues, and with bringing a greater personal touch and civil discourse to board operations.

Building strong relationships with the CEO and the board chair. The lead director cannot achieve that goal if he or she disturbs the relationship between the chair and the CEO. Instead the lead director needs to advise when requested and to interject only when he or she believes something seriously wrong is about to happen.

All the players at a nonprofit must understand that the chair and CEO, not the lead director, have final responsibilities for making decisions, except those reserved for the entire board.

Of course, the key to achieving this coordination is a strong level of trust among the three people. And to ensure the lead director has the trust of other board members, it is important to make sure that the appointment is done in a transparent and collegial way.

Providing advice to the CEO . The lead director can help the CEO by challenging and offering counterarguments when major decisions need to be made; he or she can be seen as a mentor to the chief executive. However, the lead director has to be certain that these actions do not place the CEO in conflict with the board chair, to whom the CEO needs to provide allegiance.

Become involved with the CEO’s evaluation at an early stage. Working with the board chair, the lead director can establish an evaluation process and gather formal detailed feedback from board members on CEO performance outcomes. In addition, if appropriate, the lead director can also be invited to the CEO’s performance interview to help the chair further explain and validate the review outcomes.

The use of lead directors by public companies is relatively new, but so far they seem to be benefiting from the approach. Now it’s time to see whether the idea can help nonprofit leaders improve their performance—and help ensure that both chief executives and board members get better report cards in the future.

Eugene H. Fram, professor emeritus of business at the Rochester Institute of Technology, is author, with Vicki Brown, of Policy vs. Paper Clips: How Using the Corporate Model Makes a Nonprofit More Efficient and Effective. The third edition of the book has just been released.

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