21st Century Nonprofit Boards Need to be Pro-Active in Strategy Development

By: Eugene Fram

Most Boards do not excel at strategy planning. In fact, when the subject is included on a meeting agenda, it usually produces a general lack of enthusiasm. A recent McKinsey study * cited weakness in for-profit boards dealing with the topic. And in my opinion, similar deficits are endemic to nonprofit boards whose response to strategic proposals is often simply– “ to review and approve.”

What causes these vital governing bodies to be passive when the future of the organization is obviously at stake? First, most nonprofit boards meet between 8 and 12 times a year, for what averages to about 1.5 hours monthly. With an agenda crammed with compliance issues and staff reports, there is little time left for board members to dive deeply into a discussion of future transformative efforts on behalf of the organization. When a new strategic plan is developed (that may only occur once every 3-5 years), its implementation is not as rigorous as it should be—even in high performing boards.

According to the McKinsey study, only 21% of business directors claim to fully understand the firm’s total strategy. Because of their diverse backgrounds, the percentage of uninitiated nonprofit board members is probably similar or even lower!

Next, the study also reports: “…there is often a mismatch between the time horizons of board members and that of top management.” Since the median tenure for a nonprofit board member is between four and six years, it follows that management‘s experience with the mission environment exceeds the vast majority of board members. Since the outset of the 2009 recession, it becomes critical that a dialogue between board and management brings focus to economic priorities. The economic environment remains more dynamic, requiring much more discussion.

Questions that board and management need to consider to overcome these issues.

• How well do board members under the mission dynamics? In terms of nonprofit experience, management has a better understanding of the mission’s environment. As a result, management needs to be proactive in educating board members about the dynamics involved. This can take place a meeting, retreats or engaging outside experts to interact with directors. Where it is possible and appropriate, management should invite directors to join them at local or regional conferences.

• Has there been enough board-management debate before a specific strategy is discussed? “Board members should approach these discussions with an owner’s mind-set and with the goal of helping management to broaden its thinking by considering new, even unexpected, perspectives.” During these debates management should provide information on key external trends affecting the mission. It also needs to review: strengths and weaknesses of staff talent to achieve the mission, the abilities of the nonprofit to differentiate itself and to increase services to its clientele. All of this can keep the organization from perpetuating the status quo—providing small budget increments and keeping current clients satisfied, not seeking growth.

• Have the board and management discussed all strategic options and wrestled them to the ground? Nonprofit directors and managers are not used to having high-quality discussion like these. To provide bases for his type of conversation the board must view management as a set of peers with different responsibilities. “Creating a participative, collaborative dynamic while maintaining a healthy tension is critical.”

“Developing strategy has always been complex—and becomes more so with a board’s increased involvement, which introduces new voices and expertise to the debate and puts pressure on management teams and board member alike to find the best answers.”

* http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/tapping-the-strategic-potential-of-boards