Management Expectations of the Board – The Nonprofit Story – Part II Revised/Updated
I am indebted to Dr. Richard Leblanc of York University for the action headings used in this blog. The blog uses headings developed by Dr. Leblanc for his blog: “What a Board Expects from Management, and What Management Expects from a Board, January 27, 2013, York University Governance Gateway Blog. (rleblanc.aps01.yorku.ca) For reading simplicity, Dr. Leblanc’s specific quotations, which can apply to either FP or NFP boards, are noted in italics.
The nonprofit board should speak with one voice and not send mixed messages to management and staff. Nonprofit boards are usually composed of people with widely diverse backgrounds, as compared with for-profit ones. For example, one nonprofit bard, with which I was affiliated, was split, because of its diversity as to the status of a newly hired chief executive who had encountered problems managing the staff. The board divided between two factions. One that wanted to give him more time to heal the situation, and the other that wanted an immediate dismissal. Dismissal was the final outcome, but the schism that developed between the board and staff remained for decades. Also the hierarchy of nonprofit organizations is relatively flat, operating staff personnel may only be two or three levels below the board. As a result, the communications between board and staff becomes more important than in multilayered organizations.
2. Integrity, Independence, Trust & Confidence
Most all directors of nonprofit organizations are independent directors. The board as a unit is the group, which is responsible to community or industry stakeholders to provide service. If a director promotes management capture to occur by currying favor with management (or staff,) this will undermine management-board-(staff) relations. Board-staff relations are very important in nonprofit organizations. The organizations involved are often smaller ones, and the staff feels it can be easily affected by who is on the board.
The board must build a relationship between itself, management and staff. Each group needs to respect the work that the other accomplishes. The need to develop confidence between the board and management is often a difficult one. Often board members come from larger business environments, don’t have the constraints those nonprofits encounter and may tend to view the nonprofit managers as less competent. However, in reality, nonprofit mangers may have more management field experiences than many board members, especially those who work as individual contributors like attorneys, professors and medical specialists.
3. Direction & Tone
A good-and smart-CEO wants a strong board. A board of directors should (formally counter decisions) management makes (only) when necessary to prevent the CEO from making that one big mistake. However, there needs to be an understanding between the two that nobody does their job perfectly, and the chief executive needs the latitude to take prudent risks, some of which will be errors. The board and chief executive also need to understand that the board represents a larger group of stakeholders that is looking to the board for reasonable and prudent results. These principles of understanding then can pervade the organization and serve as the basis for greater entrepreneurship.
4. Knowledge of the field and mission
Since most nonprofit directors are independent directors, often not directly associated with the field and mission of the nonprofit organization, management expects directors to invest the time to understand the (field) more fully… Otherwise, these directors will be of limited use to management strategically nor (will they be creditable directors). (Nonprofit) management gets frustrated by dated, legacy directors who have outlived their usefulness. Some get around the challenge by establishing an honorary board, one without voting power. However, all voting nonprofit directors need to “drill down” in the organization to become acquainted with the contribution of key staff. The use of “big data” analytics will enable board members to “drill down” more easily.
5. Meeting Preparation & Asking Penetrating Questions
Management expects each director to arrive fully briefed and ready to discuss (issues) and management should be able to rely on directors for this effort. Otherwise, the engagement level degrades and gets sidetracked. This is a continuing problem for both FP and NFP boards. For example, a key finding out of the Enron debacle was that the board received meeting briefing material late. As a result, the board voted to allow some conflicted “off-balance sheet partnerships” to be formed, when it should have taken more time to review the proposed decision.
While each board member has an obligation to ask the best questions possible, each must also be ready to ask the longer-term generative (what if) questions. Nonprofit directors have a more difficult time asking these types of questions since many are not intimately involved with the field. The chief executive should have cutting edge knowledge of the area to provide the directors with current & future challenges with future opportunities.