Once Again: How Should Nonprofits Conduct Board Evaluations?*
By: Eugene Fram
Process Expectations Including:
• Value of board materials: board book delivery time prior to meetings, material clarity, meeting notices, etc. Are board books delivered a week ahead of meetings?
• Stakeholder Relations: Board interactions with various nonprofit stakeholders, especially staff. To what extent do directors meet with key stakeholders? To asses this expectation, are records noted of these
interactions? Which directors are most adept at building these relationships?
• Willingness to evaluate qualitative outcomes** To what are data developed that go beyond typical records such as accounting statements and membership records? What about more diffcult datga to develop such as brand
image and impact on the community? Hearsay evidence should not be used to assess these important outcomes.
• Composition of the board in regard to diversity including gender, skills, age, board experiences, etc. Does the organization have a diversity policy? Do current board members have sufffient prior boartd experteinces in
order to act as models for new members without prior board experience.
• Action plans including a summary, for the board minutes, which obligates the board professionally to take action and may have liability implications if plans are not executed. The plan should provide evidence of a robust
evaluation. With luck, some nonprofits may be able to relate their field accreditation processes with the action plans.
Director Evaluation Approaches
As boards evolve, they can use: individual self-evaluations by each director; evaluating the board as a whole; peer-to-peer assessment, engaging an independent third party to conduct the process & to advise on confidentially and to present a report. Finally, the whole evaluation process can be outsourced to an independent facilitator.
Coming from an academia background, in which the peer-to-peer process is strongly engrained, I suggest a peer-to-peer blind review (source of individual comments not revealed to others) with a third party expert to advise on process and develop the report. This action needs to be supported by a report of how the board has accomplished its process expectations as listed above.
This venue for evaluation has its limitations in the nonprofit environment, but at least each director will obtain an understanding how others perceive his or her contributions. Also it will assist the board chair in asking those who are not contributing to resign from the board.
The major limitation are that nonprofit board members can tend to be restrained from being too critical, sometimes allowing for a report to have positive biases to maintain harmony. It does not assist the board chair with the most difficult job of counseling a disruptive director, making a substantial financial contribution, to leave the board.
Recent (2012) data from BoardSource show that only about 50% of boards have had “formal, written self-assessment of board performance in the last three years.” With the rapid turnover of directors that nonprofit boards traditionally experience, this seems inexcusable. Consequently, nonprofit boards need to have these evaluations more frequently then for-profit boards. While not all can financially afford to use the process described, at the very least a board member or small committee can review past board minutes every year to determine what has been promised to be accomplished and compare the information with what has been accomplished.
*Based on comments related to for-profit boards by Scott Cutler & T.K. Kerstetter on video, This Week in the Boardroom, Corporate Board Member, 1-31-2013.
** See Jerry Talley & Eugene Fram (2010) “Using Imperfect Metrics Well: Tracking Progress & Driving Change,” Leader to Leader, winter, pp. 52-58.
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Hi Gene; An issue that I faced recently that the peer to peer evaluation involved our D & O Insurance policy. We had a Board of a NFP that had been around for 40 years and recently we switched insurance providers. Normally someone signs off the insurance premium before it goes off to the provider. This year we decided as an ongoing governance review to fully read and question any items not fully understood. We noticed that background checks while not required but suggested were or have not been done in the past. Since this NFP deals with children and some Board members are involved in events, fundraising and other activities, it left us open to some risk. It is part of the governance checklist but for some it is usually managements role. I say ask the questions.
Tim: This is a tough one, especially in light of the Penn State situation. The only real world experience I have had related to D&O involved a split board where the two founders were wrestling for control. Three law firms were involved. One day in the heat of battle, my personal attorney, who was also representing one of the founders, called and said, ” I just read the D&O policy, resign from the board.” I did and feel, from that experience, that competent directors or board counsel should read the policy.
You and your colleagues were wise to take that step and now know the risk level. In my opinion, as a lay person, I would carefully overview management in respect to these procedures and explain the need for the careful overview. You folks might even want to review the details of a sampling of actions that management has taken in the area,
I once served as an outside reviewer in an instance where an attendant in a nursing home raped a patient. First question asked: how did the organization go about vetting the attendant before hiring.