The Balancing Act – A Must For Nonprofit Boards
By: Eugene Fram
The success of the board depends on making sound judgments in numerous situations that involve balancing different interests.*
Like for-profit boards, nonprofit boards must juggle a variety of interests and objectives when making strategic decisions. But board meetings are often constrained to 1-2 hours, making it almost impossible to give thoughtful consideration to a disparity of perspectives. How does your board weigh in on the following conflicting issues? Following are areas in which thoughtful balancing needs to take place.
Risk vs. The Mission Statement: NFP Boards are constantly faced with decisions that can negatively impact achievement of the mission. A common risk issue, for example, centers on adding additional services, which are always sought by clients. If services are added will the risks involved advance the mission? Boards need time and consensus to develop critical thinking in these situations. It takes more effort than simply offhandedly inquiring whether or not the new service will contribute to achieving the mission. Boards also need to surface unintended consequences, example added expenses, that might impact the organization.
Thinking Short Term vs. Long Term: Volunteer nonprofit directors have been humorously described as “birds of flight” through an organization. These part-timers having limited terms, usually six years, and have little financial risk, only some potential reputational risk. As a result, directors often are not apt to plan strategically. The CEO and others with long term vision often must be the catalysts for motivating the board to move forward strategically.
Effective Oversight vs. Motivating Management: Micromanagement of staff by their volunteer boards is always a clear and present danger. To keep the balance, nonprofit boards must have guidelines for separating policy/strategic decisions from those handled by operating management. (See: http://amzn.to/eu7nQl)
However, the guidelines are never perfect and both the board and management must be ready to acknowledge unintended intrusions on each others turf. Beyond a start-up situation, board intrusion into operations can hamper growth.
Ethical Considerations vs. Market Practices: Board ethical considerations can come into play if the board decides to actively seek funding that does not directly help the organization to achieve its mission. The funding may even subvert the mission. If the directors decide to seek this type of differentiated support, they have an obligation to recast the mission. Easter Seals has been successful in successfully revising the mission: the group had an overt problem, the decline of polio affliction. Most nonprofits, however, will need to have substantial stakeholder and funder support for such a radical change.
Balance Planning vs. Execution: Assuming a board is able to achieve a reasonable balance in each of the above areas, it can achieve a competitive advantage via “implementing programs in a way that offers better outcomes.” ** But success will also depend upon the asset advantages of the organization “Asset advantages can be a location, an endowment that generates unrestricted income or an angel investment board.
Nonprofit board effectiveness will depend on how well a board can achieve balance between the values listed above. But the balance must be accompanied by a current asset advantage or promise of assets that can be rapidly deployed.
• Yilmaz Argument (2010), Measuring the effectiveness of corporate governance, Knowledge, INSEAD, Paris, France, April 10th.
** Jo Debolt (2013), Comment on Nonprofit Strategic Planning Website, October 23rd.