Are Nonprofits Changing The Makeup Of Their Boards
Effective governance past the board of a nonprofit organization is a rare and unnatural human activity. Only the almost uncommon of nonprofit boards functions every bit it should by harnessing the collective efforts of achieved individuals to advance the institution'southward mission and long-term welfare. A board's contribution is meant to be strategic, the joint product of talented people brought together to apply their cognition and experience to the major challenges facing the institution.
What happens instead? Nonprofit boards are ofttimes little more than a collection of high-powered people engaged in low-level activities. Why? The reasons are myriad. Sometimes the board is stymied by a main executive who fears a stiff board and hoards information, seeking the board'due south approval at the last moment. Sometimes board members lack sufficient understanding of the work of the establishment and avert dealing with issues requiring specialized knowledge. Individual board members may not bring themselves fully to the chore of governance, considering board membership generally carries piddling personal accountability. And often the powerful individuals who make up the board are unpracticed in working as members of a team. No thing which crusade predominates, nonprofit board members are frequently left feeling discouraged and underused, and the arrangement gains no do good from their talents. The stakes remain low, the meetings process-driven, the outcomes ambiguous, and the deliberations insular. Many members doubt whether a board tin have any real power or influence.
The cardinal to improved performance is discovering and doing what we call the new work of the board. Trustees are interested in results. High-powered people lose energy when fed a steady diet of trivia. They may oblige direction by discussing climate command for fine art exhibitions, the condition of quondam steam lines, or the design of a new logo, but they get charged up when searching for a new CEO, successfully completing a capital campaign, or developing and implementing a strategic program. New work is another term for piece of work that matters.
The new piece of work has four basic characteristics. First, it concerns itself with crucial, do-or-die bug central to the establishment'southward success. 2d, information technology is driven by results that are linked to defined timetables. Third, it has clear measures of success. Finally, information technology requires the engagement of the organisation'south internal and external constituencies. The new work generates high levels of interest and demands wide participation and widespread support.
The New Work Requires New Practices
The new piece of work defies the conventions that have regulated board beliefs in the past. Whereas the customary work of a nonprofit board is express to scrutinizing direction, the new work requires new rules of engagement and unorthodox means of fulfilling a board's responsibilities. The pressures on nearly nonprofits today are too groovy for the old model to suffice. Nonprofit leaders tin can take the post-obit steps to better board practices:
Find out what matters.
Traditionally, nonprofit boards and CEOs accept agreed that management defines problems and recommends solutions. A board might refine direction's proposals but rarely rejects any. Why? Few trustees know the industry or the establishment well enough to do more, and those who do dread being labeled equally meddlers or micromanagers. Lath members sometimes are made to experience that asking a thorny question or advancing an culling opinion is disloyal to the administration. A vote on an upshot is a vote on the CEO. But how can a reactive, uninformed lath know what opportunities the organization is missing? And how much damage must the system sustain before the board realizes something is amiss?
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To exercise the new piece of work, trustees and management together must make up one's mind the important issues and the calendar of the organization. Trustees need to sympathise what the CEO sees as the critical bug. They also need to know what other stakeholders and industry experts remember, considering no chief executive knows enough to exist a board'south sole supplier of information and counsel. Knowledgeable trustees can help inform the CEO'southward judgment. They can also perform a useful office for the CEO by focusing the organisation'southward attending on bug that are unpopular within it or that autumn outside the staff'south capabilities. In addition, the board can find out what matters by engaging in the following 4 sets of activities:
Make the CEO paint the big picture
The litmus test of the chief executive'south leadership is not the power to solve bug alone but the capacity to articulate key questions and guide a collaborative effort to formulate answers. As one member of a museum's board observes, "What I want most from the president are the large ideas." The CEO must exist willing to share responsibleness, and the board must be willing to follow the CEO'south atomic number 82—and inquire questions. "If you don't do that," says one college'southward trustee, "the board doesn't actually have a clue well-nigh what is going on. When a problem arises and the CEO needs the trustees, they won't ain the problem or be willing to help solve it."
The CEO should review the organization'southward foremost strategic challenges annually with the board. The board, for its part, must consider whether the CEO accurately targeted and divers the issues. This is a moment, peradventure the moment, in which the board adds value. Together, the CEO and the board must agree on the institution's priorities and strategic direction. Those considerations, in turn, will shape the work of the lath and its evaluation of the CEO.
The lath of a college in the Due south has formalized this process successfully. At a retreat each January, the CEO and the trustees rank the most important challenges facing the institution. Then the lath structures its committees to reflect those priorities. Terminal year, for case, the lath concluded that marketing and technological infrastructure were its top concerns. The lath formed job forces of trustees and constituents to study those issues, to specify the decisions the board would have to make during the coming year, and to clarify the board'due south needs for information and instruction. At the May board meeting, the task forces provided initial reports, and the board decided how to organize in order to pursue the problems. Trustees too adult measurable expectations for the president that were linked to the board'south top concerns.
Become to know key stakeholders
Boards and CEOs have to know what matters to the constituents they serve. The interactions of the erstwhile work—which were mostly social events and testify-and-tell sessions—volition not do. The new work requires two-way communication. As a college president remarks, part of the reason for such communication is "to brand the board vulnerable to constituents"—to make it accessible and answerable rather than insulated from the ordinary life of the institution. In that spirit, the boards of several colleges at present run into routinely with leaders of pupil, faculty, and alumni bodies to explore matters of common concern.
The new work requires that lath members and CEOs get to know their institutions' stakeholders.
Consider the example of a residential treatment center for children with emotional disabilities. When a major benefactor died, the eye needed to find new sources of income. While interviewing leaders of social service organizations (a major source of referrals), several board members were shocked to detect that the center was seen as elitist and interested only in piece of cake cases. In fact, many professionals referred the easy cases to less expensive intendance and assumed that the center would turn down the difficult ones. Alarmed by these misperceptions, the trustees formed a task strength to guide a public relations effort. The board expanded to include trustees with ties to sources of referrals and strengthened its relationships with other constituents through educational events and joint programming. "I desire to make sure this lath is never once again and so out of touch with its community," said the board's chair at the end of the process.
Close ties between the board and constituents unnerve CEOs who are determined to be the board'south sole source of information and fear that straight communication between trustees and stakeholders volition weaken fourth dimension-honored lines of authority. That reaction puzzles board members; equally 1 college trustee asks, "Why not have students talk to trustees? What'due south there to hibernate? These are our clients. I'yard old enough and smart enough to know that some people simply want to complain. Trustees are as qualified as the president to interpret the views they express. The closer I get to reality, the meliorate I tin sympathize with and assistance the CEO."
Consult experts
Many nonprofits are susceptible to competitive forces and to changes in public policy. Consider, for case, the touch on museums of cuts in funding by the National Endowment for the Arts, or the effect on hospitals of efforts to reform federally funded health care. Unless trustees empathize the basic economics, demographics, and politics of the manufacture, boards volition be difficult pressed to separate the trivial from the significant and the adept news from the bad. The new work requires learning well-nigh the industry from many sources.
Ane of those sources should exist experts on the board itself. Although boards regularly recruit trustees with expertise in functional areas like finance, law, and marketing, the new work requires a lath to have more than a few trustees with relevant professional expertise: physicians on a infirmary's board, academics on a higher's board, social workers on a clinic's board. Skillful trustees can guide fellow lath members through a foreign culture. For instance, one Ivy League institution counted a former academy president among its board members. At i point, he criticized his colleagues for second-guessing the administration'south disciplining of a fraternity, saying, "I'd exist furious if my board did this." The board backed off. And at a liberal arts college, a trustee who was a professor at some other school helped brainwash the board about the complexities of measuring educational activity quality and reallocating academic positions from departments with failing enrollments to those with growing need. At the same time, he helped institute the lath's credibility with the faculty.
Outside experts can aid a board empathize the result of demographic changes on an institution.
Another source of knowledge is outside experts. They can aid boards understand competition, client demographics, trends in government support, and public policy debates. For case, the board of a Protestant theological seminary faced with failing enrollment conferred with experts on professional person teaching, the economics of religious educational activity, and the demographics of its own denomination. The trustees learned that their denomination's population would continue to refuse, further eroding financial back up for the seminary and job opportunities for new ministers. On its electric current course, the institution would be bankrupt in a few years. The seminary decided to leverage the strength of its high-quality faculty by becoming a resource to the broader Protestant community, offering theological instruction to laypeople and continuing education for church workers and ministers, both on campus and in local churches.
Make up one's mind what needs to be measured
Corporate boards typically monitor a express number of performance indicators. Those vital signs convey the company'due south overall condition and point potential problems. Nonprofit boards often lack comparable data, largely because the trustees and the staff take never determined what matters most.
Together, the board and management should identify x to 12 critical indicators of success. For a higher, that may mean scrutinizing its tuition discount (the average remission the institution gives to students as fiscal aid). For a museum, it may hateful measuring its total return on endowment investments. For a hospital, the lath may monitor occupancy rates. Distinctive strategies can advise novel measures. A boarding school focusing on computer literacy monitored the ratio betwixt students' dial-ups to the campus network and their phone calls from their dorm rooms for pizza commitment. A ascension percent of network calls meant that students were becoming more comfortable with new technology. Using comparable inventiveness, an orchestra with an aging subscriber base monitored ticket sales to single people in their twenties and thirties who had attended chamber music programs with wine and cheese receptions held afterwards.
Graphic comparisons against projections, past performance, or industry norms focus a board's attention on crucial issues and remind trustees that the ultimate goal of the board is to influence those indicators in a positive way. As the CEO of a college in the Midwest says, "We have a ready of central functioning in dicators, explicitly linked to the strategic plan, that are reviewed at every meeting. We even put them on a pocket-size card that trustees can carry effectually."
Human action on what matters.
In the world of the erstwhile work, the lines were clearly fatigued: the board remained on the policy-setting side of the net, management on the implementation side, and so the game of governance was played. In the new work, the board and management are on the aforementioned side of the internet as partners in both roles. The question is non, Is this an outcome of policy or implementation? Rather, the question is, Is the outcome at mitt important or unimportant, key or peripheral?
In the new piece of work, the board and management work together on both policy and implementation.
Today few nonprofits can risk disallowment the CEO from policy development or divorcing the lath from policy implementation. In a majuscule campaign, establishing priorities and goals is setting policy, identifying prospects and making calls is implementation. In the search for a new CEO, determining selection criteria is making policy, designing the procedure and conducting the interviews is implementation. In cursory, most important matters cannot be subdivided neatly into policy or administration.
In many instances, implementation is far more consequential than formulation. For instance, in face-to-face meetings, trustees of a Cosmic women's college persuaded affluent older alumnae to support a new institutional focus on serving poor minority women from the inner metropolis. The board of another higher, troubled by the decline in students able to pay full tuition, selected 3 trustees to assist the administration with the design of a marketing strategy aimed at attracting more than students able to pay.
In another case, a university owned a commercial radio station. The board questioned how the station fit in with the school's mission. After deciding with the president that the academy could turn profits from the sale of the station to meliorate educational use, the trustees negotiated the transaction. Later, the president exulted, "This was the lath at its best." The board members knew more the staff virtually the radio business and about selling a major nugget, and they put that knowledge to apply.
Involving trustees in policy implementation can be critically important during a crisis. In the aftermath of the scandal at the United Way of America (the CEO used more than a million dollars of United Way coin for personal expenses), the lath and CEO of one local chapter agreed that each of the trustees would interview five business concern leaders to learn what the chapter might practice to better community support for an upcoming campaign. The advice was consequent: admit that the national organization had blundered badly, stop all payments to the national headquarters until the charges were resolved, promise that all funds would remain in the community, allow donor-designated contributions, and hope that the board would issue a public report on allocations. The CEO and the trustees accepted those recommendations and inaugurated an intense public-relations attempt that engaged every lath member. In the end, the campaign was almost equally successful as the previous year's and was substantially more successful than those of other chapters in the region. That would not have been the case had the board but gear up policy.
Organize effectually what matters.
The board's new work must be organized to deal with the institution's priorities. That may seem self-evident, but boards often organize their work in functionally oriented committees (concrete plant, finance, public relations) that channel trustees toward low-stakes operational decisions. For the new work to happen, substance must dictate construction. Committees, piece of work groups, and task forces must mirror the institution's strategic priorities.
For the new work to happen, substance must dictate a board'southward construction.
For instance, a theological seminary replaced nigh of its operationally oriented committees with ones that reflected the major goals of the strategic plan: globalizing the curriculum, improving relations with local churches, and providing continuing education for the ministry. The committees included trustees and constituents. I result: on the recommendation of the committee on church relations, the seminary established a clearing-house to provide local churches with technical assistance in such areas as financial management, developed education, and church building governance.
In another example, the board of a preeminent women's higher has under active consideration the creation of four "councils" (business organization affairs, campus diplomacy, external diplomacy, and governance and board diplomacy) as umbrellas for clusters of standing committees. The council on campus diplomacy, for case, would oversee the activities and orchestrate the annual agendas of the student-life, admissions, and trustee-kinesthesia relations committees, which would run across only as necessary. The council chairs would coordinate the annual agendas of the four councils and advise strategic issues for in-depth discussion at board meetings.
Chore forces that include constituents and nontrustee experts can tackle critical still discrete matters such as outsourcing sure functions or installing a total quality management program. For example, the lath of an independent day school appointed 2 task forces to explore accreditation issues with the appropriate state and federal agencies. The task forces gathered data about demographic trends, accreditation requirements, and possible legislation that would bear on independent schools. At a special Saturday session, the task forces presented their findings, the board discussed whether to seek accreditation and whether to become more selective, and the task forces disbanded. The piece of work had been washed.
Such "tissue newspaper" task forces (use and discard) drive the lath toward real-time results, multiply leadership opportunities, and preclude longtime members from dominating standing committees. As one college'due south trustee confesses, "Many of our standing committees don't really shape policy or identify needs. They're an empty ritual, a brunt, not an nugget. In contrast, chore forces are very effective. For example, we're looking at the cost and shape of a marketing plan. A task force helped the board understand the trouble and recommended directions. In that location was a material deviation in the sense of ownership."
Focus meetings on what matters.
Boards are boards merely in meetings, and notwithstanding meetings are where boards underperform most visibly. Many trustees think that lack of fourth dimension is the most meaning barrier to a lath's ability to perform the new work. In fact, the greater problem is the failure to determine what matters and to let that imperative drive the frequency, format, and duration of board and committee meetings. And if a board tin can meet only infrequently or for short periods, trustees should consider realistically what they can evangelize. The chair, the CEO, and perhaps the executive committee should blueprint each meeting by asking the questions, What is the purpose of this meeting? and How can we organize it to fulfill that purpose? Iv common responses volition assistance illustrate the bespeak.
Nosotros need more background to make a decision
This reply calls for a word led by a moderator. Discussion sessions tin can appoint and educate the entire board about problems facing the institution. The goal is to air views, invite questions, and consider alternatives—not to win an argument. No specific decision is on the tabular array, and no votes are taken.
Consider the case of the college board that was more often than not concerned—only not sufficiently informed—virtually the interrelated bug of pupil quality, tuition charges, and fiscal aid. Each year, the finance commission, usually under pressure to balance the side by side year'due south budget, presented a tuition recommendation to the board. The process afforded no practical opportunity for the lath to written report the causes and effects of tuition increases. Final year, the lath convened explicitly to larn more almost the effect of tuition and fiscal aid decisions on enrollment and student quality, as well as on the lesser line. Subsequently, the board devised principles to govern the finance committee's recommendations for the following twelvemonth. Those principles included the determination to hold institutionally funded fiscal assist to below 25% of overall tuition only to employ grants to concenter improve students. The board as well decided to increase average class size in order to free upwardly resources to heighten learning partnerships, including student-faculty research projects.
At another university, each of the board'south cardinal committees appears once a yr before the whole board for a half-day session to nowadays information on a noun issue or special area. For example, the finance committee led a lath session to explain capital letter budgeting, deferred maintenance, and depreciation of assets. A chore force on instructional engineering science that included faculty and students held a panel discussion to describe the country of the art across the nation and how technology was being used on their campus to transform the learning process. As a result of such sessions, reports the chair, "The whole board becomes more than knowledgeable most the issues. The quondam edible bean counters on the finance committee now see other aspects of the institution."
We don't know what to practise about a current problem
The new work, by definition, grapples with complicated issues that defy easy solutions. Trustees and management must be able to present multiple perspectives and develop solutions that reflect the grouping'due south best thinking. A meeting'due south design is disquisitional to making that happen. Discussion must middle on the explicit question at manus, such equally, What should be our top three priorities for the capital campaign? or What specific steps tin the lath take to improve ties to the corporate community?
Small groups create a more than comfy environment for trustees to speak freely. Says one college board member, "I may accept a comment worthy of sixteen ears, but not ane worthy of 60." Small groups provide venues for brainstorming, arenas where there are no dumb questions or insane ideas. A lath member of a midwestern university explains, "Before we added small-scale group discussions, all 50 trustees sat passively and listened to a few people impart information. The procedure was superficial, and substantive participation was express to the executive commission. Small groups allow everyone to participate genuinely."
We face up a crisis
In times of crunch, business organisation-every bit-usual must be pushed aside to allow the board to concentrate on the affair at paw. Crises might include the loss of a major source of funding, the sudden departure or expiry of the CEO, the ascent of a competitor, or even a split inside the board itself.
For example, a local Alzheimer'southward Association chapter lost a major grant in 1993 and had no immediate prospects for significant new funding. The chair called a special meeting of the board to talk over restructuring the chapter's services. A review of the mission statement reminded trustees of the organization's purpose; an examination of what information technology would mean to reengineer the organization helped open up discussion of central issues. By the end of the meeting, board members accepted responsibility for specific tasks to help manage the crisis: explaining the chapter'south mission to potential sponsors in the community, exploring the restructuring experiences of other chapters, and examining with staff the best ways to smoothen the transition to a smaller, more than tightly focused organization.
We need to deal with sensitive governance issues
Executive sessions without the CEO present open lines of advice among trustees. "We accept an executive session after each board coming together," says 1 higher trustee. "We experience free to bring upwardly anything at all. This is a time for us to really ask questions and probe." Among the questions a board might entertain in an executive session are, Did we deal with important issues? How did the meeting get? Can nosotros better serve the CEO? Differences of opinion among trustees or betwixt the board and the CEO can be treated more candidly in an executive session. Says one lath fellow member of a women's higher in the S, "If there are sensitive issues, the executive session gives us a hazard to counsel one another."
These examples of the new work and new structures are far from exhaustive. Boards should experiment with different formats for different purposes. Utilize what works.
Leading the Way
Trustees protest regularly that artists, academics, physicians, and other professionals stubbornly resist change. Nevertheless governing boards are among the least innovative, least flexible elements of many nonprofits. Boards are as reluctant to forsake committees as kinesthesia members and physicians are to eliminate departments. Trustees resist varied formats for board meetings more than musicians resist novel formats for concerts. And board members oppose new membership criteria equally strongly as teachers oppose nontraditional certification.
This hypocrisy was plain to the chair of a midwestern university's board. "It's tough for a group like this to be self-conscious. They're classic CEOs. They can tell stories nearly empowerment and team building, but that's non how they got where they are. They are uncomfortable with questions similar How are we doing? and How should we improve? Most of our members are heavy into productivity. The board isn't hesitant to enquire kinesthesia and administrators to respond these questions. The board wants everyone else's time to be more than efficient and effective, but the lath should look for ways to improve, as well."
Also oft, trustees presume that organizational success proves that the board has performed well, even when in that location is fiddling evidence that the board played a significant role, and even when staff members say privately that the success was achieved despite the board. "Most boards have the mental attitude," a trustee of a women's college notes, "that if information technology ain't broke, don't ready it, but I call up it'southward better to ready information technology before it breaks." A sympathetic caption for the reluctance of nigh boards to experiment with substantial governance reforms would be the trustees' desire to do no damage. A less charitable explanation would exist the trustees' want to do no work.• • •
Moving to the new work takes work. As the CEO of a midwestern university recounted after the institution's board had changed, "It required getting people out of their lilliputian corners, the areas that they had learned and owned. They wanted to piece of work on what they knew all-time and leave the residual to others. They had to rotate around and learn everything in order to govern the organization. They've moved from being just guardians of the physical institute, overseers of the administration, and suits with deep pockets."
Boards across the nonprofit sector are calling on institutions to change. As trustees need testify of productivity gains, efficient processes, and enhanced outcomes, they should model the beliefs they seek in others. If boards demonstrate the capacity to discard shibboleths, dismantle old structures, and desert securely ingrained modes of operation, the professional staff may follow accommodate. If the board does not practice the new work, the trustees' hypocrisy will be blatant, and the value added by the lath will be too meager to inspire organizational reform.
A version of this article appeared in the September–Oct 1996 upshot of Harvard Business concern Review.
Source: https://hbr.org/1996/09/the-new-work-of-the-nonprofit-board
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