By: Eugene Fram Free Digital Image
Every Board—whether for- or non-profit –creates its own organizational “stage.” True, there is an ever-revolving cast of characters and variable props. But as any artistic director will tell you, it’s the quality of the performance that can make or break the perceived value of the production.
On a parallel plane, Russell Reynolds Associates, an international executive search firm, lists six key issues (in bold) that can determine the performance level of a for-profit board.
(http://bit.ly/1f5Yt7F) Following are my views on how these questions can be applied to nonprofits. Such information may help directors to assess their own organizational impacts.
• What do the various stakeholders expect from the nonprofit and the board in its oversight role?
Many high performing nonprofits boards now recognize that they must be more proactive in communicating with stakeholders in order to compete for funding. Such actions include listing their annual IRS Form 990 on their websites and attempting to assess qualitative impacts by using imperfect metrics to drive change over time. In addition, the increase in the number of high profile boards suffering fraud losses has increased stakeholder interest in nonprofit board oversight evaluations.
• What does the CEO need and expect from the board and its chair in terms of functional expertise, senior team building and succession planning, strategic guidance, etc.? I believe, and have worked with high performance boards where the two are seen as forming a partnership, each understanding their different roles. This view is hotly contested because many nonprofit directors view the CEO as a board “servant” reporting to director “bosses.” Many nonprofit managers reinforce this view by referring to boards as their bosses.
The nonprofit board needs to recognize that the CEO is a managerial professional, capable of managing a senior team, and a spark plug for effective strategic guidance. In turn, a CEO must be comfortable with a robust overview of his and the organization’s performance, at least once a year. Both CEO and board are responsible for CEO succession planning in the event the CEO is temporarily incapacitated. Also the board is responsible for ensuring that capable people are promoted.
• Are the board’s policies and practices as rigorous and effective as they should be? Beyond the mere meeting of regulatory requirements, (making certain the budget is balanced annually) does the board use its experience and expertise to help drive the nonprofit’s performance?
Too many nonprofits are content to allow the CEO to “mind the store”—keep a balanced budget and make small incremental changes in outcomes or processes. What is needed is for nonprofit directors to ask questions and make suggestions that allow the organization to be as effective as it can be in terms of offering maximum client services. For example, board members now question as to why some nationally focused universities need to have billions of dollars in endowments, when much of the money could be used to support financially poor but able students.
• How does the Nominations Committee assess the competencies and skills needed for the board given the (nonprofit’s) particular opportunities and challenges…? The usual candidates for nonprofit boards are person defined by their occupations—lawyers, teachers, accountants, etc. Little attention is traditionally given to add behavioral characteristics to their skill matrices. These include such strengths as strategic and leadership skills. While these are harder to define and assess, they are critical for a board to meet the challenges of a fast changing nonprofit environment.
• Does the board have the strength and depth to steer the nonprofit through a financial crisis, a reputation-damaging event or a sudden CEO resignation? There is sufficient empirical data to indicate that many nonprofit boards are unable to handle these types of situations. In addition, the board and CEO, have to develop an ability to develop working relations with a continuing “parade” of board chairs/presidents, many only holding the position for one year.
• Are there well-defined boundaries between the board and the executive team so that oversight does not encroach upon operations? There are two ways of accomplishing this objective. One is to attempt to define the boundaries involved in detail. It requires producing a document that is similar to a job description for operation boundaries. .
Another method is to define the duties of the board and to allow all other management actions to be operational, subject to robust overview. This requires a great deal of mutual trust between the board and management. It assumes that, on occasion, each may mistakenly overstep a boundary line and that the other does not do its job perfectly. It involves an action oriented learning process that further enhances trust and build a partnership environment.
As an example of the second approach, the board has the following responsibilities:
A. Direct management
1. Establishes long-term organizational objectives
2. Sets, in conjunction with management, overall policy affecting strategies designed to achieve objectives
3. Employs the CEO
B. Overview management actions
1. Evaluates short-term and long-term management performance in terms of outcomes and impacts.
2. Determines whether policies are being carried out and goals achieved
C. Approve management actions
1. Critically reviews, approves, or disapproves proposals in policy areas (for example, major capital need/expenditures and major contracts)
2. Provide for recognition and acceptance of executive decisions when related to operational concerns.
D. Advise management
1. Acts in an advisory or consultative capacity on operations when sought by management
E. Receive information from management
1. Regularly receive reports on the organizations (e.g., performance program development, external factors, concerns)
F. Act as a public community relations resource to management
1. Keeps the organization attuned to the external environment in which it operates.
G. Form a partnership with management to achieve fundraising objectives
Nonprofit boards need to be aligned with the attributes cited above. Their stakeholders are starting to demand that more nonprofit boards become high performing ones.