Author jbauer

Author jbauer

How Should the Board Be Organized?

John Bauer March 6, 2019 blog, News
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Having discussed the CEO’s role in building the best board possible for the size, age and culture of the organization, I’d like to turn my attention to some of the issues related to how nonprofit boards organize themselves to actually get the work done. On the surface, it would seem that these areas are outside the realm of CEO influence, but as I will demonstrate, they do fall within the area of what I call “reciprocal governance.”

What I am not going to do in this article is advocate a particular type of governance such as “policy-based” governance, governance as leadership, or psychological centrality and board-centered leadership. These all have their adherents and I am not going to judge their veracity or appropriateness. What I will do is discuss generally accepted principles of board organization and how the CEO can work within that structure to support the board and its work.

Size of the Board

The size of the board will depend largely on the duties and expectations of directors. In younger, smaller organizations in which active participation in the actual functioning of the organization is required, boards tend to be young, energetic, passionate and active. As organizations grow, board size may grow as well, especially if demands for fund raising, financial oversight of a more complex organization, and growing staff warrant board support and involvement.  In older, larger and more mature organizations, board size may actually decrease if the board is disconnected from management or if director responsibilities do not include such things as fund raising, advocacy, or event sponsorship. Depending on the age, size, philosophy of governance and scope of duties, therefore, the size of the nonprofit board may vary. 

Generally speaking, however, over the past decade we have seen a general decrease in the average size of nonprofit boards. According to a BoardSource survey from 2017, the average size today is sixteen and the median size is fifteen. With this in mind, one might rightly ask, “Is there an optimum size?” for nonprofit boards that reflects best practice? The quick answer is “no.” The size depends on its needs. However, “it is difficult to imagine that a board with fewer than five members is able to incorporate all the desired qualities and capacity or that an exceptionally large board is able to engage every member in a constructive manner. Regardless of size, all board members must be engaged, as all are equally liable for the organization.” 1

So, what does the CEO have to say about the size of the board? How can the CEO influence board decisions about whether it should grow or decrease in size? In my view, a continuous discussion between the CEO and the board chairman and his or her executive committee can focus on board function as the determiner of ideal board size. In other words, the size of the board should never be an end in itself. As pointed out by BoardSource, the size is determined by the function and should land somewhere between the minimum number of board members required to provide the needed depth and breadth of “qualities and capacity” and the maximum number that could still ensure engagement by every member.

Three quick examples can illustrate the point. In the first case, a small nonprofit veterans support agency experienced a crisis in both leadership and governance. A new executive director and the three remaining board members worked to stabilize and then build a new organization around an expanded mission, revised bylaws and a new operations and policy manual. The optimum number of directors for the agency was determined to be nine, but both board and executive director were reluctant to add six new board members all at once. The board is currently at six, including the CEO, with the realization that additional talent is needed to ensure continuity of stable governance and to manage inevitable turnover due to term limits.

The other example is that of a private liberal arts college. For years, the number of board members stood at 25. However, a new president, determined to actively engage more potential major donors, gradually upped the number of board members to over 30. While this may have had a beneficial effect from the philanthropic standpoint, a frequent complaint heard among regents is that they have no voice at the table. This was especially true among younger regents who weren’t the financial heavy hitters that some of the large donors were. In this case, influence came with a dollar sign and engagement varied greatly.

The third example comes from a large century-old organization, the board of which I was the chairman. For a variety of reasons, not the least of which was an impending merger, we decided that the current board of 25 directors no longer served the board effectively and that we needed to right-size the board for its anticipated future needs. Through an interview and election process, the board elected from among themselves the 13 directors who would continue on the newly organized board. How it organized itself to do its work will be described below.

So, how large should the board be? While the answer depends on function, it would be safe to say that a board should be just large enough to fulfill its duties efficiently and just small enough to make sure all board members are engaged. From my experience, I believe the optimum lies somewhere between nine and fifteen directors for the large majority of nonprofit organizations.

Frequency of board meetings

Another question that is often asked is “How often should my board meet?” This answer to this question also depends on the function of the board. In a smaller, younger organization in which board members are actively involved in operational and fund-raising activities, or in which cash flow concerns are ongoing, the board may need to meet monthly to perform its responsibilities. In larger, more mature organizations, meeting three or four times per year may be sufficient. In trying to determine the appropriate number of board meetings per year, a number of issues with respect to frequency of meetings should be mentioned. 

First, larger boards which meet three or four times per year usually have a powerful executive committee that meets in between regular board meetings. I’ll discuss the role, size, responsibilities and the CEO’s relationship to the executive committee later. Suffice it to say, there are pros and cons to empowering a small group of individuals to act on behalf of the entire board, even if there are limits to their authority.

Another issue is the length of board meetings. Generally, a smaller board that meets frequently is able to conduct its business in a relatively short period of time. For some organizations with local board members and high engagement, monthly meetings that last an hour or two are ideal. Larger organizations that meet three or four times per year will usually take two or more days at a time to conduct business, including the work of committees. And if large organizations have boards with national representation, travel accommodations, meals and meeting arrangements create logistical and financial challenges for the organization that may limit greater frequency.

A third issue has to do with how the board is structured. I’ll discuss the ideal number of committees a bit later, but for boards that function as a “committee of the whole,” less time is needed to complete the board’s work. Boards that have numerous committees will have to provide sufficient time for them to complete their work. A little over 20 years ago I was elected to the 25 member nonprofit board I mentioned earlier that had nine standing committees. These covered just about every operational aspect of the organization from communication and development to religious life, finance and administration. Two full days were required just for committee meetings. Every board member served on at least three committees. Over time, this board recognized the need to reorganize. Eventually, it decided to downsize from 25 to 13 directors and from nine to three standing committees, including an executive committee. For a 100 year-old organization, this was their ideal.

So, the answer to the question about frequency of board meetings depends on the size and age of the organization, the size of the board, the geographic distribution of directors, expectations and engagement of board members, and the committee structure, if any.

Board Function

For many years, the conventional wisdom was that nonprofit boards were responsible for overseeing the work of the staff which was led by their CEO or executive director and that to do so required them to be fully briefed on all operational aspects of the organization, especially the financial status of the organization. This “fiduciary” responsibility required in-depth reporting from staff as a requirement to fulfill this duty. 

In recent decades, the nonprofit board’s responsibilities have evolved to include strategic thinking and boards were expected to make decisions around the vision and strategic goals needed to fulfill the organization’s mission in the future. Strategic planning became the focal point of board work.

Most recently, however, governance leadership has been expressed in what is called “generative” leadership. It involves the engagement of the “intellectual capital” of the board to help chart the course around trends and issues that potentially affect the board’s functioning and the organization’s future. In a seminal work on generative governance, Richard Chait distinguished among these three board functions:2

Fiduciary Governance leads the board to ask, “What do we have and how do we use it?”  The fiduciary mode fosters accountability and promotes discipline. The work involves facts, figures, financials, and risks.

Strategic Governance leads the board to ask questions about market positioning and market share; about strategic drivers and priorities; about competition and comparative advantage; and about who the key stakeholders are. Strategies are developed by looking at what is going on now, thinking about a desired future, and exploring ways to close the gap between the two.

Generative Governance leads the board to ask the questions that come before the fiduciary and strategic questions such as: Have we framed this issue correctly?  How else might we look at this?  What else should we consider?  Generative thinking can lead to a reconsideration of how the current state may best be understood.

All three of these functions are important and each should receive sufficient time and attention by the board. But how can the CEO lead the board to emphasize strategic and generative thinking and help the board fulfill its fiduciary duty, while diminishing attention on routine operational concerns? I believe the CEO can utilize several strategies to drive the board toward an expanded concept of governance. For example, I built meeting agendas around strategic plan position and goal statements with staff reports focused on goal attainment. Because much of my performance as a CEO was based on the extent to which we accomplished the goals articulated in the strategic plan, I wanted to make sure that the board had sufficient time in every meeting to review our strategic position and where we were headed. Additionally, as I worked with the board chair to set agendas for board meetings, I suggested generative questions for board discussion and allocated sufficient time in the board meeting for discussion. Having an assistant capture the salient points of the conversation gave value to the discussion when reported in meeting minutes. 

Finally, I obtained agreement from the board that operational reports would be sent to the board for background reading between quarterly board meetings. These “briefing books” were rarely discussed at board meetings but provided in-depth information about all aspects of the organization. They also reported out key performance indicators, financial data, and other measures of quality and effectiveness. Abbreviated financial statements and the CEO’s quarterly report were presented simultaneously to our corporate and foundation boards which always met on the same weekend in order to save time, build connection between the boards and allow us to present one consistent message.

For me, how the agenda was structured communicated the relative importance of the three broad areas of board governance. My board chair and I negotiated how much time was going to be allocated to each agenda item and the agenda reflected these times. Having a timed agenda also creates a sense of urgency to get to the heart of an issue and complete the discussion in the time allowed. Operations recommendations and actions were compiled in a consent agenda. Committee reports were limited to action items. Strategy issues were discussed in the context of the strategic plan. Generative issues and board self-assessment discussions were included in the agenda and time was blocked out to make sure everyone had an opportunity to contribute. 

In my experience, board members find the most fulfillment in thinking that they have contributed to the board and to the success of the organization. They are excited to share their professional experiences in ways that benefit the organization and are gratified to believe they have somehow advanced the cause. These feelings come from active participation in meaningful discussion. They do not come from rubber-stamping boring operations reports which require no discussion, present no challenges and serve no purpose other than to validate the work of the staff. I believe it is the CEO’s responsibility to make sure the board is appropriately engaged in meetings. This happens when the meeting agenda is crafted to accomplish these goals. In effect, the agenda “choreographs” the meeting. Boards function best when they know which steps they are taking and when.

Board Committees

While it may be the case that very small boards of small organizations have no need for committees, the typical nonprofit board organizes its work through committees which have defined areas of responsibility. As discussed earlier, traditionally organized boards were commonly structured around operational areas of the organization and committees were constructed around each with a staff member representing the area. This was understandable for organizations which actively engaged board members in the earliest years of existence as a way to make sure services were delivered. In mature organizations, however, such committee structures actually can inhibit boards from making critical strategic decisions by bogging them down in operational details and allowing staff to hide or avoid discussing strategic challenges under a mass of reports.

Since Sarbanes-Oxley, board governance in the nonprofit sector has undergone some fairly radical change. Emphasis on the ethical conduct of the board and staff, monitoring key performance indicators, focusing on how quality is measured, mapping strategies for the future, ensuring quality board functioning and membership, minimizing risk, maximizing compliance – these have become priority activities for boards. How can these be accomplished through nonprofit board committees? And how can the CEO support the board in fulfilling these duties?

In my experience, research into best practice suggests that nonprofit boards should have no more than three standing committees. These three committees include an executive committee and two book-end committees that cover the critical board functions: governance and audit/compliance. I’ll discuss them briefly and describe how the CEO can support their work. Having used this structure to good effect, I recommend that all issues not included in the explicit work of these committees be left to the board as a “committee-of-the-whole.”

The executive committee should meet between board meetings to handle issues on behalf of the board. This makes sure that timely action can be taken on time-sensitive issues. I recognize that there are pros and cons to having an executive committee. In one sense, giving an executive committee authority to act on behalf of the board between board meetings creates a situation in which board leadership if vested in a small minority of the board. This “elite” group may be perceived as the real board and give rise to resentment by other board members. On the other hand, nimbleness and responsiveness to a changing operating environment may necessitate timely action that a few can facilitate. Great sensitivity to these concerns coupled with complete transparency can avoid some of the shortcomings of this approach.

My experience as a CEO, however, underscores what I believe to be the real value of the executive committee. My executive group consisted of the four officers of the corporation. They were veteran board members who I used for “advice and counsel.” They were my sounding board and my confidants. In my organization, the secretary of the board chaired the governance committee and the treasurer chaired the audit committee, thus ensuring connectedness to board committees. This small committee could be convened at a moment’s notice, even by teleconference. The value of the advice I received, coupled with their concern for my well-being at different points in time, could never be measured. Because they were also responsible for my performance review, I believed that it was critically important that they knew what I was facing in my leadership role. 

The executive committee was also responsible for advancing the next iteration of the strategic plan to the board, along with its associated budget. So, the work I and the staff did to prepare these proposals for them to consider set the stage for larger board meeting discussions. In this way, I could set the agenda for board discussions and actions.

One of the board’s biggest responsibilities is to make sure that the right people with the right abilities and experiences are elected to the board. Once elected, however, it is the board’s duty to monitor its own performance and the effectiveness of every individual director. I discussed this function in a previous article, “Who’s on the Board?” I believe a governance committee has a wide range of responsibility that begins with annual review of bylaws, policies and procedures for how the board functions. These duties then get reflected in regularly evaluating the talent mix of the board and, through its nominating function, to recommend candidates for election to the board that meet those needs. Orientation and onboarding processes should be reviewed by this committee to make sure new board members are appropriately integrated into the function of the board. Evaluating board performance – both corporately and individually – is also the responsibility of this group. The CEO can provide resources to make sure that consistent procedures are used by the board. Constructing annual schedules with deadlines for completing these functions can help the committee stay focused on those duties which have annual significance.

In the wake of the Enron scandal, much attention was given to boards and the extent to which they ensure ethical practice by the organization. This initially focused on financial accountability but quickly expanded to other areas including human resources, philanthropy and operations. The idea of an audit committee is nothing new. What is new is the expanded role of such a committee to include much more than hiring an accounting firm to conduct the annual financial audit. Today, audit or compliance committees oversee risk assessment and monitor risk mitigation plans and strategies. They ensure the ethical treatment of clients and employees and support a system for receiving complaints. In larger organizations, this usually includes a whistle-blower system that ensures anonymity of complainants and a process for objective review. They make sure that the organization is in compliance with all federal, state and local laws and regulations. They oversee conflict-of-interest policies and procedures and make sure that directors and staff do not act out of self-interest. Briefly stated, the audit committee can be thought of as the conscience of the organization, making sure that it is behaving in all areas appropriately.

A recent post on the Blue Avocado website3 suggested that besides the executive committee, nonprofit boards should have an internal affairs committee, an external affairs committee and a governance committee. The link to the discussion is included below. Let me just say that I disagree with assigning internal operational areas, including those related to finance, human resources, and facilities to a board committee. I further disagree with the idea of assigning external issues such as fundraising, public relations and marketing to an external relations committee. It’s not that the board doesn’t have a legal and fiduciary interest in these matters. It is more the fact that such committees tend to cross the line between governance and management. Unusual operating conditions can be discussed by the board as a whole without diving into the weeds through such a committee structure. Ultimately, the CEO is responsible for managing his or her staff in all these areas and, therefore, is accountable to the board.

Communication

Before I get carried away with the remaining points I plan to make, I’d like to offer some advice on how the work of the board gets communicated, by whom and to which audiences. In my opinion, the communication of board decisions takes place through meeting minutes. These should be publicly available. Therefore, it is imperative that minutes be written in a manner which presents the substance of motions while minimizing the content of discussion. Board secretaries or staff members charged with taking minutes should use an accepted style guide such as that offered by Roberts Rules of Order.

It is natural that some major decisions will be highlighted in organization publications, especially around strategic or capital decisions, but nothing should ever be communicated that would reveal details of the board’s decision beyond what the board decides should be communicated. In this regard, there is often value in discussing with the board how a particular decision will be communicated and who is authorized to speak on behalf of the board.

This is a very important issue. I learned a rule which I have followed rigorously as a CEO, as a board member and as a consultant to CEOs and their boards. The rule is simple: the board exists only when it is in session and ceases to exist the minute it adjourns. No board member, unless otherwise authorized, can act or speak on behalf of the board. This is an important distinction. A board is a corporate entity made up of a group of directors. It functions as a group and not as a collection of individuals. Therefore, deciding who is going to communicate decisions of the board is very important. The CEO should be the point person for this discussion because it will most likely be his or her staff who writes news releases, articles, announcements, minutes and other forms of communication. The CEO is the one person who can best represent the board’s work to the public and is the one person who is accountable to the board. Just as individual board members do not represent the whole board, individual staff members should not communicate anything about board decisions unless authorized by the CEO to do so. So, when it comes to communication of board actions, the CEO is the pivot point between the board, the public and the staff.

Meeting Agendas

Board meetings follow a prepared agenda. In my experience, the agenda should be prepared by the CEO in consultation with the Board Chairman. I eventually went a step further and reviewed the agenda for the upcoming board meeting with the executive committee. This allowed for discussion around strategic issues, upcoming decisions, budget adjustments and any other matters that would require board approval. We also discussed larger issues and the generative question I proposed that was intended to engage the board in a deep and relevant discussion around critical issues.

As mentioned earlier, board agendas should be timed to reflect the importance of reports and topics, but also to keep the board focused on the work at hand. An old mentor of mine used to say, “Work expands to fill the time allotted to it.” Open-ended agenda topics are a sure way to run out of time at the end of a meeting. I found that if a meeting had a scheduled ending time, board members would be much more mindful of how the discussion was proceeding toward a decision and would work to expedite discussion without unduly curtailing anyone’s right to speak. Exceeding the scheduled time for adjournment would require a motion to continue.

I found that it also helped to state the nature of the decision in the agenda and to describe the hoped-for deliverable. For example, an agenda item might read: “The Board will discuss the recommendation of the Governance Committee to amend the policy related to spouse travel to board meetings.”  The proposal would have been distributed for reading earlier. Discussions tended to be brief and to the point and a vote on the motion from the committee was forthcoming in a timely manner. In contrast, you can imagine what might follow if an agenda item read: “Spouse travel to board meetings.” If the topic was introduced in an oral report from the committee with no time to prepare – well, you can imagine.  

Should the CEO be a voting member?

Finally, I’d like to touch on a question that I’m often asked about whether or not the CEO should be a voting member of his or her board. Opinions on this subject vary across the literature and other consultants have weighed in on both sides of the issue. I’ll give you my own experience and opinion.

I was not a voting member of the organization of which I was the CEO, nor did I ever desire to be a voting member. Let’s go back to the overarching question I posed for this series of articles: “Who’s the Boss?” For me the simple fact that I was employed by the board meant that I was not a peer to the other directors. There was a power differential and I had no desire to pretend that I was “one of the gang.” That is not to say that I had no influence with the board. The whole point of this series of articles is to emphasize the powerful role the CEO can and should play with his or her board to support, encourage and even direct them in their work. 

I felt that my position as CEO automatically gave me all the “bully pulpit” I needed to communicate, persuade, recommend, advance, push, cajole, demand, advise, suggest – well, you can supply whichever verbs are appropriate for your situation. As you can tell from what I’ve written so far, I feel strongly about what executive leadership should consist of and how it should be expressed toward the board.

Some will say that they have to have a voice at the table and the prospect of casting a deciding vote in the case of a tie is important. My response is that if it has come down to that, the CEO has not done an effective job of educating or persuading the board on the best course of action. In fact, I would go so far as to say that demanding a vote on the board sends two wrong messages to the board. First, it says that the board can’t be trusted to make the right decisions. Second, it communicates insecurity on the part of the CEO. The fact that the CEO must recuse himself or herself from discussions dealing with CEO compensation or performance diminishes the role they play. Boards can go into executive session whenever they wish to handle such matters without having to “take away” the CEO’s vote.

Conclusion

Boards can organize themselves in many different ways. Nonprofit boards come in all sizes and shapes and with their own cultures and processes for getting their work done. While age, size and scope of responsibility may vary, there are a number of commonly accepted “best” practices that should be observed in all boards. Beginning with the performance of their legal duties and extending to the practical matters of budgeting and planning, nonprofit boards are key stakeholders for the organization. The CEO must, therefore, learn how to influence the board in ways that maximize support for the organization and its mission. This means becoming adept at working through the structures of board organization.

References and Resources

1  BoardSource.Leading with Intent:  The 2017 National Index of Nonprofit Practices. https://leadingwithintent.org/wp-content/uploads/2017/09/LWI2017.pdf

2  Chait, R., Ryan, W. & Taylor, B. (2005) Governance as Leadership: Reframing the Work of Nonprofit     Boards.

3  https://blueavocado.org/board-of-directors/boards-should-only-have-three-committees/

Who’s on the Board?

John Bauer February 26, 2019 blog, News
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Supporting the nonprofit board in fulfilling its responsibilities and directing the successful fulfillment of its duties is, as I wrote last week, a significant executive function for the CEO. However, being able to act in various ways to help the board do what it is supposed to do effectively is going to be tempered by the quality and capability of the board. In this article, I will explore the CEO’s role in making sure that the directors who serve on the board possess the experience, education and skill needed to govern the organization – not only as it is currently constituted, but as the organization it aspires to be in the future. 

Four Contexts for Board Development

Every nonprofit organization provides a historical and cultural context within which the board and staff must work together to keep the organization in alignment with the mission. I can think of four different starting points for this discussion about board composition which reflect different points in time and circumstance in the life of a board. I have been involved in examples of all four and will share some of my experience as I talk about the CEO’s role in building the board. The important thing to stress is the fact that boards evolve in the same way organizations evolve. Therefore, the kind of governance needed and the collective skill set of the directors should evolve as well to meet changing conditions.

The Mature Organization

The first, and most common, is that of a mature organization which has been in existence for a long time, in which one or more CEOs have preceded you and the board has well-established policies and practices. In accepting your current position, you have inherited a board that has its own history, capabilities and culture. The challenge facing the CEO comes from having to assist the board in assessing its strengths and weakness and its ability to adapt to meet future governance requirements. The dynamic in this situation runs in two directions. The board hired you presumably because you “fit” the profile of what they were looking for in a CEO. At the same time, you have to view the board in terms of its ability to support you and the mission of the organization as it faces its future.  

I was hired by a strong and well-established board to be the CEO of a century-old social service agency to individuals with intellectual and developmental disabilities. I had been the board chair prior to being hired to provide merger integration project management. Decades of effective leadership by previous CEOs supported by large boards contributed to a strong sense of identity, history and a very definite board dominated governance culture. Inheriting a seasoned executive team along with long-term board members provided a strong sense of stability for the organization. It also meant that changes needed to face major shifts in how services were provided was going to be a challenge. Board reorganization after the merger was only the beginning of my journey with the board toward more effective governance practice.

The Start-up

The second situation at the other end of the spectrum exists when the CEO is the founder of the organization and, in order to organize as a 501(c)(3) nonprofit, must recruit the first board of directors. As the organization begins to gain traction and experiences initial growth, this may present significant challenges to the founder, especially when some organizing activities would seem to take absolute control away from the founder. Moving from independence and entrepreneurial control to collaboration and consultation requires a mental shift. The move from autonomy to accountability requires an awareness of roles – both on the part of the CEO and the board – and a willingness to grow into increasing levels of organizational maturity together.

As a consultant, I am privileged to provide pexecutive coaching to the founding CEO of a legal clinic that serves a marginalized population. The organization has grown quickly in both staff and influence. The CEO has been quite adept at recruiting new board members and has done an admirable job of surrounding herself with directors who have influential community connections, professional skills and strong commitment to the mission. She has recognized, however, that the demands on her time to manage others and to evolve into more of an executive role has put her in a vulnerable position. How she will navigate the treacherous waters of growth while keeping her board appropriately engaged is producing a measure of tension and uncertainty. Adapting herself into a changing leadership role by delegating work to others and trusting their competence is a challenge. Knowing how to use her board effectively and appropriately to help her through this transformation is a learning process for both the CEO and her board.

The Founders

A third starting point occurs when a group of like-minded individuals choose to do some good work together and create an organization in which they, the founding board members, are all the volunteer worker bees, responsible for every aspect of the work. This might include raising money, providing services, tending to the finances and managing other volunteers. Many church-based social ministry organizations had their beginnings this way. It is a natural expression of compassion for others in need to find ways to organize charitable, volunteer programs, some of which eventually grow large enough to become nonprofit corporate entities. Upon legally organizing as a nonprofit charitable organization, the first huge challenge for such groups is the hiring of their first executive director. Giving up the day-to-day, hands-on work of the organization to an employee is psychologically something board members often struggle with.

As a founding board member for a television ministry, I experienced first-hand the challenges of hiring the first president and the difficulties inherent in transferring responsibility to the chief executive. All the board members were corporate leaders, most of whom owned their own companies. While they shared a big vision for the ministry, executing that vision was driven by a few, strong-willed individuals. Eventually, the founding board brought in new members and was able to transition into a strategic, governing board as the organization grew into a staff of over a dozen, including a president and CEO, a chief operations officer, fund-raising professionals and the lead presenting pastor, who had a larger-than-life personality. In time, the board divided the president and CEO position and hired a retired corporate executive to be the CEO. The board and leadership recognized its evolving needs and adapted accordingly. The new CEO has taken a much stronger leadership role vis-à-vis the board.

Upheaval and Change

The fourth situation arises when the organization is in a state of major transformation and must significantly alter its governance structure. Such circumstances may arise from a crisis in leadership, merger with another organization, financial exigency, or some other significant event. The importance of cooperation and collaboration between the CEO and the board cannot be overstated. 

As a consultant, I worked with a veterans service organization that provided mobility devices for wounded veterans of the war against terrorism in the Middle East. At the time of my engagement, the organization had experienced leadership turnover, attrition of board members, had just promoted its development director (the wife of a wounded veteran) into the CEO role. The new executive director was passionately determined that the good work of the organization should continue. The CEO and the remaining board members proceeded to rebuild the board from the bottom up. Over a period of months, I worked with this board to revise its bylaws, develop a new operations and policy manual, and recruit and onboard new board members. Concurrent to this activity, the organization seized several opportunities to expand its mission to include advocacy, family support and adaptive sports. Today, the CEO and her board are positioned to capitalize on her connections in government to make a significant difference for all veterans.

My digression into examining four organizational scenarios is intended to place the following strategies into context. I wish to repeat that I am not advocating that the CEO should manipulate, control, rig, or pad his or her board of directors. The board is ultimately responsible for the mission, vision and programs of the organization, but it is the CEO who is entrusted with leadership responsibility. The relationship between governance and management should ideally be characterized by mutual respect and support. The desired leadership environment I am advocating is one of reciprocal, mission-driven – some might say, symbiotic – mutuality. Boards and their executives need each other and need to support the respective work of each. My purpose in this article is to show how the CEO can help make sure that the board is comprised of the right people who can function at the right time in the right way for the benefit of the organization.

Six Ways to Build a Better Board

Having described possible historical, political or leadership contexts a CEO might find himself or herself in, I’d like to offer a number of strategies which CEOs can employ to build a better and more effective board. I believe these strategies can be utilized in any one of the scenarios I described above, although I would readily admit that means and methods of implementation might vary according to the CEO’s personality, the composition of the board and how roles and responsibilities are defined. I won’t maintain that this list is exhaustive. I merely offer up these strategies as possible avenues for the CEO to exert executive leadership to build a better board.

Board Development

The first way that the CEO can assist the board is to make sure it has the knowledge about the organization, its environment and itself to understand the kind of governance leadership that is required. Ongoing education about the field of service, the issues and challenges it faces, the financial and human resource needs it has, changes that are anticipated in the operating environment, imminent regulatory requirements, best practices in nonprofit governance, and ethical and legal issues facing nonprofit boards are a few of the numerous areas of information that boards need to provide effective generative leadership. The CEO should have a board development plan to provide on-going education around the issues that influence the organization’s future. Such a plan should ideally be developed collaboratively with the board, but the content of education and training should come from the CEO, his/her leadership team, and/or carefully chosen consultants or knowledge experts in the field.

Asset Mapping

A second way the CEO can assist the board is to help manage a type of talent assessment process with the board. This might look like an asset map or matrix in which current board members are profiled in terms of profession, education, relevant experience, donor potential, age, gender, race and other skills or assets. While it may seem controversial in today’s politically and racially charged culture to call out age, race or gender, organization’s that are committed to having diversity on their boards must be intentional about identifying and recruiting board members who are women, younger and persons of color. Working with the board’s governance or nominating committee to annually map the attributes of board members can identify gaps or vacant spots on the matrix for attention when recruiting and reviewing potential new board members. The CEO can help the board by managing this process and graphically reporting the results for the board to review.

Director Candidate Management

A third way the CEO can help build a better board is to make sure that the board has a highly qualified pool of candidates from which to select new board members. Some boards want to be very active in identifying successors to the board. In fact, some boards have an explicitly stated expectation that retiring board members should nominate their replacements. I personally do not advocate that position for a couple of reasons. First, retiring board members are most likely to nominate people like themselves in terms of social, political and economic position. This may not meet the real needs of the board and may not address one or more gaps in the board’s make up. Second, I have found that retiring board members often nominate board members who will allow them to remain connected to the organization and its board by proxy. In other words, the successor nominee provides a conduit to what the board is working on and allows the emeritus board member’s voice to be expressed through the successor. I’m not impugning motives. I’m merely pointing out the potential downsides of such a practice. 

In my mind, the CEO is in a good position to identify and recommend highly qualified individuals for board membership. In his or her roles as chief communicator, chief fund raiser and chief advocate, the CEO is going to encounter individuals with exceptional talent and relevant background to be of great service to the board. To me, that meant keeping a file of potential board candidates which I regularly reviewed, added to and amended as I obtained more information or had additional contacts with candidates. You have to think about managing such a file of potential board members in the same way a fund-raising professional manages a donor prospect file. I also noted issues of timing, current service on other boards, job changes, relocations, family circumstances and other factors that would suggest either immediate or deferred recruitment. Thinking back to the board asset map, such candidates should be qualified in terms of those attributes that would be of greatest benefit to the board. I was especially mindful of the kinds of talent that were needed in light of possible challenges the organization was likely to face in the future or the skills that were lacking for the current board to attend to current realities. In short, I actively worked a candidate list to determine interest, willingness, relative value to my board and timing. From this active list I could, therefore, advance candidates to the board’s nominating committee who I knew would become strong assets to the board. Ultimately, the board (or membership, if a membership organization) chooses board members. But as the CEO, I felt it my duty to provide the board with the best candidates possible from whom to choose.

Board Effectiveness Assessment

A fourth way the CEO can help build a better board is by assisting the board in conducting its own effectiveness assessment. This process can take two forms, both of which are strongly encouraged in governance literature: periodic assessments of overall board effectiveness and individual board member effectiveness. The former can be conducted using a variety of widely available tools and resources, such as those developed by BoardSource. Such an overall assessment should evaluate the board’s performance around the commonly accepted duties of board members that I described in last week’s article “What do boards do?” Evaluating individual board member performance is a much trickier process, but one that is incredibly important to make sure the board has the right people on the bus. Most often this evaluation occurs when board members are approaching the end of a term and are considering being elected to another term. When I was a CEO, my board allowed for the possibility of four consecutive terms of three years each. Facing the prospect of having the same person serve for twelve years necessitated a process of triennial review. While the CEO shouldn’t conduct this review, it is important to provide input. Generally, such an assessment is done with a combination of self-evaluation, peer evaluation and an interview, with the results managed by the nominating committee. What the CEO can and should provide for the committee is data around the incumbent’s value and contribution to the board as the CEO sees the organization moving into the future. This contextual data is important to make sure the nominating committee is focused on talent and not personality.

I have to be very honest, however. Individual board member evaluation is very difficult for boards to do objectively. Nonprofit boards tend to be very collegial and enjoy each other’s company – even apart from their passionate support of the mission. They are volunteers who don’t get paid to participate and enjoy the board experience and the friendships they develop on the board. In my experience, nobody likes to tell another colleague on the board that they haven’t contributed meaningfully or that they are not providing value to the board. This reluctance has shown itself even in the face of board members who are disruptive, negative, critical, non-participative, absent or who in other ways diminish the board’s effectiveness. While a sensitive matter, the CEO should (assuming a good, trusting relationship between the CEO and the board chair) delicately urge those responsible for doing the evaluation to hold their colleagues accountable. This at the very least should include an honest review of board member expectations and a plan of development or improvement if the review committee does not feel comfortable withholding nomination for reelection.

Terms of Service

While it is outside the control of the CEO, term limits present a fifth opportunity to build the board. In my experience, the total number of years a board member is eligible to serve should be inversely proportionate to the age of the organization. A very young start-up organization which is founded by volunteers who become the first board members can benefit immensely from having those founders serve through the inevitable pains of organizational childhood and adolescence. When an organization has been around for a long time, however, more frequent turnover on the board provides opportunity for expanding the network of support, provided that former board members continue to support the organization financially and with connections and influence.

So, how can the CEO exert executive influence on term limits in order to build the board the organization needs for each stage of development? Term limits are defined in the organization’s bylaws and the CEO should be very knowledgeable about the processes for amending bylaws, policies and procedures governing elections and terms of service. In this regard, the CEO should be able to provide perspective to the board about the organization’s governance maturity and how regular bylaw, policy and procedure review can be responsive to these evolutionary changes. Recommending shorter overall terms of service could appear to be self-serving, unless it is framed in the CEO’s and board’s commitment to mission and to achieving the organization’s preferred future. 

Orientation and Onboarding

Finally, a sixth way in which the CEO can build a better board is through a process of orientation and onboarding of new board members. Even if new directors were not of the CEO’s choosing, how that new board member is introduced to the organization, the staff, its programs and services, management functions, expectations for board members, board meeting agendas and supporting materials and a whole array of other information is entirely under the control of the CEO. I viewed this activity as of paramount importance as my one great shot at telling the organization’s story through my lens.

My staff and I assembled a formal orientation program that usually ran for a full-day, preferably the day before the new director’s first board meeting. We prepared a range of materials, beginning with a PowerPoint presentation of the organization’s history, programs, services and organization. We had the new director visit briefly with all the key executives who shared information about their areas of responsibility and the issues they believed were on the horizon. I also made a point of going through the board’s operations and policy manual which contained a detailed explication of board member responsibilities, including expectations around philanthropic support. Feedback from new directors invariably were positive and indicated that the experience was of great value.

Now, as a consultant, I have had the opportunity to consolidate these processes into an orientation program for new directors at other organizations. One of the deliverables I provide is an orientation system that can be used by other CEOs to orient their new board members. Careful attention to thorough and comprehensive orientation can go a long way toward avoiding having to urge the board to “get the wrong people off the bus” at a later date.

Conclusion

I have offered up six ways in which a CEO can exercise executive leadership and effective management practice to build a better board. As I stated earlier, I believe they are applicable and relevant to every one of the four scenarios I described at the outset. However, I’d love to post comments and reactions from CEOs who are willing to share their experiences in trying to build a better board. If you have strategies you have employed successfully in this regard, I’d love to add them to the discussion so others can benefit from your experience. 

Finally, as you think about how you would answer the question, “Who is on the Board?” you might also ask yourself, “What help might I need if I am interested in developing and executing strategies to build a better board?” To help you answer that question, I urge you to give me a call. You are under no obligation. It would be my pleasure to have the conversation with you.

What Do Boards Do?

John Bauer February 18, 2019 blog, News
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The duties of nonprofit boards of directors have been elucidated, enumerated, elaborated ad nauseum by many different authors and agencies. From BoardSource1to Bridgespan2to the Council on Nonprofits,3finding lists of duties is not hard. Just Google this question and pore through a plethora of sites. 

The real question, however, is “What role does the CEO have in both helping the board fulfill those duties and directing the way in which the board carries out its responsibilities?” In other words, “How do I get the board to do what it is supposed to do the way it is supposed to do it?” In this article, I will attempt to put this unique spin on the commonly accepted duties of nonprofit boards. 

It may sound to you like I am suggesting that the CEO actually usurp some of the board’s duties or, at the very least, to manipulate or control the board’s functioning. That has never been my belief or intent. But I will admit that I probably go further in actively engaging with the board than some might feel comfortable doing. Recall from my introductory article that I framed this nuanced approach as “co-leadership through reciprocal governance.” With the organization’s mission uppermost in my mind and its success and sustainability my duty, my active partnership with the board was required.

With that in mind, let’s briefly take a look at each of the ten responsibilities suggested by BoardSource as a way to demonstrate how the CEO should be actively involved.

Determine mission/vision

Ultimately, it is a board’s responsibility to declare to the world what the organization stands for, who it serves, how it serves and why. We commonly call such a declaration the organization’s mission statement. Following closely after such a declaration is a statement of aspiration or vision. This informs the public about what the organization intends to look like in the future. So, the mission describes what is, the vision statement describes what will be. These statements are the domain of the board. It is not for staff to dictate what these are, nor is it appropriate to merely adopt the recommendations of a consultant. 

How the board initially crafts and, over time, revises its mission and vision statements, however, requires periodic, thoughtful reflection. This is where the CEO plays a critical role. Because the majority of board members are typically not professionally engaged in the work of the organization, education around current research in the field, trends in the industry, future opportunities and challenges, adjacent services and the evolving attributes of the population being served is extremely important. Through board development, the CEO and his/her team can enhance and direct the thinking of the board by proposing adjustments or revisions of mission and vision statements to reflect these changes. 

In my experience, leaving it up to the board to word-smith the mission statement opens the door to all kinds of possible undesirable outcomes. Remember, boards only exist when they are in session and most boards only meet three or four times per year. To leave this important statement to the dynamics of one board meeting is not something I ever wanted to risk. Instead, I and my team spent the hours needed to craft a new or revised mission statement – usually as part of our annual strategic plan update process – and proposed it to the board. They appreciated the educational opportunity and it gave us a chance to demonstrate our competency and knowledge.

Ensure continuity of executive leadership

The board’s major responsibility is hiring, supporting, evaluating and retaining the right CEO for the organization. Presumably, you are that person. However, you won’t be there forever, so how can you help the board make the right decision again when you are gone? Who do you want to succeed you? While I don’t think it is a good idea to allow CEOs to pick their successors, I do believe the CEO has a critical executive role to play in ensuring the continuity of executive leadership at the CEO level. You know the demands of the position and have a unique perspective with respect to the kind of person it takes to lead the organization. Your deep commitment to the mission of your organization means that you have an equally deep interest in good executive succession.

The best way to support the board in this vital function is to make sure you have a comprehensive succession plan in place. This may require the support of a professional consultant, but generally, the content of a succession plan is fairly straight forward. A good succession plan should describe a path of action for the board to follow when it loses its CEO. Multiple options should be included to respond to the various circumstances under which the CEO might leave. These should include voluntary separation such as retirement, voluntary resignation, or transfer. Involuntary separation could include death, incapacitation, or termination for cause. For each of these possible causes for a vacancy in the CEO position, notices should be in place for use with public media and organizational stakeholders along with step-by-step action plans for the board to follow to provide immediate and long-term succession.

In the organization I served as CEO, the succession plan process was begun under my predecessor in anticipation of his eventual retirement. A consultant was engaged who guided the Board’s executive committee through the planning and development process. When they were faced with having to replace their retiring CEO, the board was very well equipped to conduct a national search for a new CEO, ensuring the highest level of integrity and transparency in the process.

You might ask, what role does the current CEO have to play in all this? In my view, it is the CEO’s responsibility to make sure that the board annually reviews the succession plan, updates it as necessary and has it on file for immediate use if necessary. I used the occasion of this annual review to go over the various components of the succession plan, update contact and responsibility lists, and in general, to make sure the document was a workable practical procedure manual that could be implemented at a moment’s notice.

I also believed that the succession process required me to have resources available to the board such as contacts at search firms, the names of staff members who would handle the practical aspects of communication, and most important, the name of the individual on the staff who could serve as an interim CEO in the event of sudden departure. This, too, is something that should be discussed in the annual plan review. Although selection of the next CEO is always a board decision, developing potential highly qualified candidates from within the organization should always be in the mind of the CEO. The difference lies between growing potential leaders and actively promoting them to the board. The first is an obligation of professional development. The latter can be perceived as self-interested manipulation.

Strategic planning

I have written a considerable amount on the subject how nonprofit organizations ought to engage in strategic planning. These can be found in the archive section of this blog. The entire ten-part series of articles on this subject has been compiled into a book which is scheduled for publication in April. It is not my purpose here to talk about the process of strategic planning as much as it is to discuss the board’s responsibility for strategic planning and how the CEO can lead and support that effort.

Every nonprofit board should be concerned about where the organization is headed and its preferred position in the future. The strategic plan describes this future and the path to achieving it in the form of strategic goals and objectives. Adopting this plan and holding the CEO accountable for its attainment are among the chief responsibilities of the nonprofit board.

 The CEO and his/her staff, however, should play a crucial role in supporting the strategic planning efforts of the board in a number of key ways:

  • Research into environmental, demographic, labor, technology and economic trends, along with developments in service delivery and competition can best be done by professional staff in these areas. The strategic planning process allows the CEO and his/her staff to educate the board, demonstrate their expertise and support substantive discussion and engagement by board members in the issues facing the organization.
  • The process and structure of strategic planning should be researched and proposed by the CEO to the board. There are myriad ways to engage in strategic planning and finding the right fit for the organization is an executive recommendation. This might extend to recommending the best consultant to shepherd the process with the board as well.
  • Framing the language of position statements, goals, objectives, initiatives and other expressions of measurable intent should be proposed by the CEO and staff. Of course, the board ultimately approves their wording, but leaving this task as an open-ended responsibility of the board is like trying to design a camel by committee. Furthermore, it is my opinion that the board’s responsibility extends only to adopting high level position and goal statements. Tactical statements such as objectives or initiatives are management decisions and should not be determined by the board.
  • Ensuring that a system is also in place that facilitates making immediate strategy decisions in the face of changes in the operating environment is the responsibility of the CEO. Providing the criteria and process for short-range decision-making will help the board deal with uncertainty and ambiguity while still functioning within the framework of the strategic plan.
  • Monitoring performance around major strategic goals and initiatives and reporting progress is up to the CEO. Regular reporting to the board gives the assurance that the organization is moving toward its preferred future. This is an opportunity for the CEO to affirm and support the board’s vision with data that shows the organization’s progress.
  • Finally, I would be so bold as to suggest that the majority of the CEO’s annual performance review should be done on the basis of performance around achieving the goals of the strategic plan. The CEO should have a self-interest in the accurate and frequent reporting of performance in those key areas that demonstrate the effectiveness of his/her leadership.

Determine programs and monitor quality

What the organization does and with whom it does it is ultimately a board decision. Whether such decisions are informed decisions, however, is controlled in part by the CEO. Educating the board on a regular basis about the breadth and depth of services provided by the organization, the changing demand for those and other programs and services, and the changing nature of the clientele seeking what the organization provides – these are all areas of information that support recommendations for additions, changes or deletions of programs and services offered by the organization. In this regard, such education must be grounded in solid data. I say this because I have experienced too many instances in which boards were tempted to make decisions based on anecdotal information or narratives of personal experiences from board members.

Another way the CEO can make sure the board is appropriately informed about the organization’s programs and services is to give them direct but controlled exposure to the clients and staff in the service setting. One example will suffice. As a national service provider operating in 14 states, it was the custom of my organization to hold its winter meeting in one of the warmer regions of the country and to schedule tours of facilities and programs. Visiting group homes and apartments, having dinner with clients in their homes, and visiting vocational training and employment centers put board members in direct touch with the programs and services, the clients supported by those programs and the staff who deliver those services. Staff members and clients from those areas were invited to the board banquet held in conjunction with the board’s meeting. In subsequent board meetings, when alternative service opportunities were presented to the board, I was confident that they had sufficient experience and knowledge to make an informed decision.

Such direct exposure also supported presentation of quality measures for the board to review. These quality measures were depicted in our list of Key Performance Indicators (KPIs) and presented in our reports to the board each quarter. The connection between the board’s direct experience and the quantitative measures of quality cannot be understated. Numbers must be connected to visualization of how people are positively affected. Seeing truly is believing when it comes to program development.

Ensure organizational sustainability

Sustainability has become the watchword for many nonprofit organizations. It is the technical term for the old mantra: “No money, no mission!”  Scientifically expressed, sustainability is the ratio between the perceived relative impact of the organization’s programs and services and the financial viability of those programs and services. I have described the approach to determining sustainability proposed by Zimmerman,4et. al. in my model for strategic planning. 

In practical terms, sustainability from the board’s perspective addresses two distinct issues, both of which involve the CEO. The first issue is the matter of funding for the mission. In most cases, revenues for nonprofits come from two main sources: government and donors. In the case of most social services, Medicare, Medicaid, Social Security, Section 8 housing funds, HUD, SSI and other sources provide grants or reimbursement for services. The CEO and his/her team are directly involved in making sure programs comply with requirements, maximize funding opportunities, and do not exceed the limits of the funds available. If these efforts require advocacy to enhance or increase public funding for needed services, the CEO should have in mind ways to engage board members appropriately and effectively to contact legislators and other government officials on behalf of the organization.

At the same time, most nonprofits must be engaged in raising non-operating revenues and the CEO plays a key role in this regard. The CEO is usually the major gift fund raiser, works with development staff to cultivate gifts and solicit donors, and is involved in fund raising events. The board also has a duty to support fund raising efforts, both personally and through contacts with potential donors. I am of the view that the CEO has an ACTIVE role to play in soliciting board members for their personal financial support, as well as engaging board members in identifying and soliciting potential donors for their support.

I worked out a schedule of periodic visits with board members to update their annual fund commitments, any major gift campaign donations, and also to discuss their planned or deferred gifts to the organization. Some might argue that it was not my place to do so as an employee. I believe that, unless you have a board chairman who is a professional fund raiser and has the time to do the task, the CEO is the person who visits each board member. 

The other aspect of sustainability has to do with the impact each program or service has on the population being served. I have already treated this subject when I addressed the board’s responsibility to ensure quality. The CEO, however, should help the board understand the difference between impact (a complex concept) and client satisfaction, mission fulfillment, or efficiency. Measuring the perceived impact of each program in relation to its financial viability can provide the basis for strategic decision-making about program expansion, enhancement or elimination. 

Ensure proper management of resources

This responsibility of the board is usually exercised by the periodic review of financial statements and operations reports. How these are presented, however, can be determined by the CEO in response to the expressed needs of the board. At minimum your board should be sufficiently trained to read the organization’s balance statements, profit and loss statements and reports of cash flow. However, in my experience, these “snapshot” reports only depicted the current status of the finances and did not sufficiently describe performance over time. As an example, when I first became a CEO, my organization was in the habit of presenting up to a dozen pages of financial report each quarter. I could see the eyes of directors begin to glaze over after about five minutes of review by the CFO. After an ad hoc board committee suggested consolidating these reports and making them more readable, I came up with a one-page net budget summary report that told our financial story at a glance. The CFO’s presentation to the board became a concise, relevant, on-point five-minute summary of our status.

In addition to financial reports, however, reporting out the current status of key performance indicators along with the four-quarter trailing performance against the ultimate performance goal showed board members how resources were being translated into performance over time and how we were tracking to achieve quantitative goals. 

At this point, I wish to interject a practice which I will describe in more detail in subsequent articles. This has to do with how I structured and prepared for board meetings. It may appear that this practice undermines the board’s responsibility to ensure appropriate management of the organization and its resources. However, in my opinion, the largest amount of time in board meetings should be spent on strategic and generative topics and not on listening to management reports. In other words, the value board members brought to the table was in the form of intellectual capital which my organization needed to achieve its preferred future. Consequently, operations and management reports were NOT discussed in quarterly board meetings. Instead, we prepared extensive board briefing books BETWEEN board meetings and invited individual questions and comments. This gave the members of my team opportunity to tell the board anything and everything they felt was important for the board to know about their area of responsibility. Operations issues which required board approval, such as facility expenditures, staff additions, etc., were consigned to a consent agenda which would be voted on as a whole unless an item was voted to be put on the table for discussion. I’ve thought about this practice as it might be expressed in various sizes of organization and have concluded that size or complexity doesn’t have much to do with it as a practice. I’d recommend it to every CEO, not matter how large or small your organization and its board.

Finally, the CEO can assist the board by conducting a periodic capacity assessment which reviews systems and management procedures to make sure the organization has what is needed to execute its programs efficiently and effectively and to manage resources prudently. Board members should be involved in such assessments as a way to gain their expertise and advice, and to demonstrate competent management by the executive team. Tools for conducting such assessments can be simple or complex and many online options are available. 

Enhance credibility/share the story

My mentor used to tell me that the CEO is really just the “story-teller in chief.” Whether it is telling the organization’s story to donors, clients, families, staff or the public, effective communication of the organization’s value to others is a significant responsibility of the CEO and board members share this duty in their spheres of influence. 

Presumably, all board members agreed to serve on your board because they believe in the value of the organization to the lives of the people it serves. However, to assume that every board member can accurately and effectively communicate the organization’s story to others is a bit naïve. As in every other aspect of the organization’s operation, board members need tools and training to become good story-tellers. In fact, my organization went a step further and included spouses/partners of board members in annual presentations and training to promote better communication and advocacy. It was our practice to invite spouses to accompany board members to out-of-town board meetings. Along with tours and direct experiences with clients, staff provided resources and training to spouses about how to advocate for our programs and how to share the mission with others.

Board members ought to work with the CEO to identify and invite donors to support the organization. Extending the network of the CEO is not a passive activity and can be supported by the CEO in regular conversations with directors about their contacts and associates and by inviting board members to accompany the CEO on development calls when the stature or credibility of the  board member in a community can be leveraged to raise support for the organization. Again, this is a process that should be mentally managed by the CEO as he or she thinks about each board member.

Ensure ethical practice

Since Sarbanes-Oxley,5increased attention has been given to nonprofit boards’ responsibility to make sure the organizations they serve function in a legal and ethical manner. Last week’s article touched the surface of this concern. However, the CEO has a significant responsibility to make sure that the board has processes and policies in place to fulfill this duty. The following suggestions reflect my experiences and the recommendations of others who have had to tackle this important function:

  • Make sure the board has a whistle-blower policy and that there are procedures in place to ensure the proper, anonymous handling of complaints;
  • Develop with the board a risk management system and reporting system so the board is regularly apprised of potential threats to the organization, as well as controls and response procedures to mitigate – or at least minimize – those threats.
  • Make sure that ethical practice is included in the annual audit process. Nonprofit boards should have an audit committee which, following best practice, should also include systems which ensure ethical conduct by staff and volunteers – including the board. 
  • Transparency in reporting is of paramount importance. While I did not espouse publishing the minutes of board meetings, posting 990s, audit reports and annual reports on the company’s website satisfied minimal legal duties to be open. Public access to policies and procedures ensured open and consistent adherence to organizational commitments.

Evaluate its own effectiveness

Theoretically, the CEO would seem to have little or nothing to do with how the nonprofit board evaluates its own effectiveness. As in other areas, however, I believe the CEO has an executive role to play, first in making sure that the board actually DOES evaluate its own performance, but also in how the board uses the data from self-assessment to improve its functioning.

Of course, the CEO’s success in this regard depends upon the relationship between the CEO and the board chairman and the board’s executive committee. It is awfully difficult to suggest that the board should evaluate its own performance when there are issues related to the CEO’s performance or when there exist power struggles or personality conflicts. However, assuming people are acting like adults who truly want what’s best for the organization, the CEO can do much to help the board grow.

In my case, it certainly helped that I had experience as the board chairman of my own organization. But it also served me well to have been the chair of other nonprofit boards. Regardless of experience, however, the CEO can be of great service to the board and the organization by encouraging the board’s self-evaluation. First, by being knowledgeable about best practices in nonprofit governance and second, by being able to provide tools and resources the board can use to perform this important responsibility.

How well boards measure their own effectiveness depends upon the leadership and composition of the board and how well the CEO and the board chair work together. I was very fortunate to work with board chairs and executive committees that understood this responsibility and were willing to work together to find appropriate ways to measure effectiveness. These included the following:

  • We periodically used the board effectiveness survey produced by BoardSource. These can be administered online. For one fall board retreat, we even engaged a consultant from BoardSource who helped the board build a development plan around perceived areas of weakness.
  • The board would occasionally use a plus/delta exercise at the end of a meeting to informally discuss what went well and what could have gone better. This provided immediate feedback to directors and the CEO about how to improve the next meeting.
  • A formalized system of individual director self-evaluation and peer-evaluation was utilized when directors were up for reelection to a subsequent term. This was important for my organization because board members could conceivably serve four consecutive three-year terms. Giving the board the opportunity to provide evaluative feedback helped the incumbent realize areas in which they could become more effective.
  • Last, the board should evaluate its strengths and weaknesses by creating a talent matrix when preparing to nominate new candidates for board membership. Understanding needed areas of knowledge or expertise will help focus on electing directors who can improve the board’s effectiveness.

Of course, all these effectiveness assessments will come to naught if there are not follow-up opportunities provided for board development. This is where the CEO can have a significant impact on improving board effectiveness. Identifying areas in need of education and training, finding presenters and consultants to share knowledge and develop skills, providing resources for reading or viewing and connecting board members to mentors or staff members for advice and counsel, the CEO has a very important role to play in terms of improving the board’s effectiveness.

References and Resources

1 www.boardsource.com.   Formerly the National Center on Nonprofit Boards, this online resource is the authoritative source for all materials related to governance, board duties, fundraising, and the CEO’s relationship. BoardSource also provides board effectiveness assessment tools and consulting services.

2  www.bridgespan.com. This large consulting firm is headquartered in Atlanta, GA, and has a large library of articles and resources related to nonprofit governance.

3 www.councilofnonprofits.com. This national organization provides information around best practice in nonprofit governance and offers a large collection of online tools, articles, references and information of practical use to nonprofit boards and their CEOs.

4 Zimmerman, S. and Bell, J., The Sustainability Mindset. Jossey-Bass, San Francisco (2015)

5 “Sarbanes-Oxley” refers to the Public Company Accounting Reform and Investor Protection Actand the Corporate and Auditing Accountability, Responsibility, and Transparency Act, sponsored by Senator Paul Sarbanes (D-MD) and Representative Michael Oxley (R-OH) in response to a number of major corporate scandals including Enron and WorldCom. Although focused on public corporations, nonprofit organizations quickly adopted many of the recommendations of Sarbanes-Okley to ensure ethical practices in their organizations.

Why Do I Need a Board?

John Bauer February 10, 2019 blog, News
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There were times during my career as a CEO that I was heard to exclaim, “Why don’t they (referring to the board of directors) just get out of our way and let us run the place?” I and my team at times felt that all the work required to get ready for board meetings was interfering with getting the real work of the organization done! Managing and supporting a board of directors can be very time and energy consuming. At such times, it is very reasonable to wonder, “Why do I need a board, anyway?”

The short answer to this question is, “Because you have to!” From IRS regulations which dictate the governance requirements for a tax-exempt nonprofit organization, to state laws which regulate nonprofit incorporation, the simple fact is that accountability to officers and a board is a legal requirement of every nonprofit organization. 

In addition, there are ethical and practical reasons for having a board of directors. In this article, I intend to lay out those reasons, not so much to convince you of the need for a board of directors, but to frame the roles and responsibilities of the board in the context of how the CEO can help the board understand and carry out its duties and also how the proper execution of those responsibilities can be used to your and your organization’s benefit. Instead of lamenting about the demands of supporting a board, my hope is that you can answer the question with “Because I want it!”

Legal Reasons

State laws are universally consistent and clear that nonprofit corporations need a board to assume the fiduciary role for the organization’s well-being. These laws designate overall responsibility and liability to that board. In addition to the board’s responsibilities as a governing body, individualboard members are bound by their legal obligations, namely, the duties of care, loyalty, and obedience. These duties serve in the courts as the test for their compliance if a board member’s performance or decisions ever become a legal issue.
 
State laws also generally require a minimum size for a board — usually between one and three members. Some state laws define the lowest acceptable number of independent board members, but normally the laws do not address board composition issues. The organization’s articles of incorporation and bylaws define its internal authority and clarify the board’s role on top of the decision-making hierarchy. In membership organizations, members also have certain rights and responsibilities to approve major board decisions. The CEO must be knowledgeable about applicable law, the content of the organization’s articles of incorporation and bylaws and be able to explain these with authority to the board and interested constituents. Pleading ignorance of the law is never an acceptable excuse.
 
Federal law is even less specific in determining how the board should be structured, but it does expect the board to serve as the “keeper of the mission” for the organization and function as the designated fiduciary of the organization. When applying for tax-exempt status with the Internal Revenue Service, board members for the new nonprofit must be listed to allow the IRS to determine whether proper oversight has been established.

In complying with state and federal law, one of the board’s roles is to ensure that no inappropriate private benefit takes place in which organizational assets are diverted into the hands of individuals who can influence the affairs of the nonprofit. This is what it means for board members to be “independent,” that is, they have no personal interest or attachment to the organization from which they could financially benefit. That is why regulations governing nonprofit boards designate the board as the body which must approve all major financial transactions for the organization. The CEO can support this standard by making sure that conflicts-of-interest are identified, that financial operations are regularly audited, and that the board has been sufficiently educated to read, interpret and respond to such reports and requirements.

Many directors assume their positions on a nonprofit board with limited knowledge of their individual and board legal responsibilities. Because very few nonprofit organizations compensate their board members, directors are volunteers who may resistant to exercising their duties according to laws, regulations and policies and to put in the work needed learn these so they can function intelligently in that environment. Therefore, the CEO should take an active role in making sure that new board members are properly educated, oriented and onboarded, not just to the organization, but to their legal duties as directors. CEO’s should have a set of standardized materials and resources available to use with new board members which ensure consistency of training across time. Many resources are available for such training and orientation. State-wide councils for nonprofits, consulting firms that specialize in governance training for nonprofit boards, and national organizations such as BoardSource can provide such resources

This function should be of great importance to CEOs for the reason that investing time and energy into board development will pay dividends back to the CEO in the long run. A board which understands the scope of its legal responsibilities is less likely to cross the line between governance and management and is more likely to stay focused on its primary duties. Quite candidly, I wanted my new board members to get the story of the organization in depth from me and my team, and never wanted their initiation to the board be left to chance or to a board committee. Call it control or call it covering my butt – I wanted new board members to know what I believed they needed to know in order to perform their board duties in the most effective and mutually beneficial manner possible.

Ethical Reasons

The key ethical reason to build an effective board is to create a structure that functions to assure the public and all individual stakeholders that the organization is in good hands. The board ultimately assumes responsibility for the success or failure of the organization. Its role in this capacity is to go beyond the legal requirements and ensure that the organization not only does things right, but does the right things. Of course, the board executes these “right things” through the leadership of the chief executive and his staff, but ultimately, the board is responsible for delivering on the mission.

The board also acts as the agent for the organization’s constituents. When a supporter, client, or customer relies on the organization to use its funds appropriately or to provide trustworthy and quality services, the board sees to it that these expectations are met. Board members are not there to benefit personally from their affiliation. During decision-making they are expected to place the interests of the organization above any other considerations. In this regard, I felt on occasion that it was my responsibility as the CEO to serve as the “conscience” of the board, reminding them of the mission and the constituents we served.

Oversight is a primary duty for all boards. It consists of working closely with executive leadership to ensure that goals are met and that ethical principles serve as the guidelines for all activities. The board is there to make sure the organization remains viable and has the capacity to grow. The most obvious way in which the CEO can support the board in meeting its ethical obligations is to operate the organization at the highest level of performance and quality. In my thinking, this meant never giving the board any cause to question what we were doing or how we were doing it. To make sure they understood our actions, however, we provided extensive measures of performance. We benchmarked our performance against industry standards, we detailed trends along measurable variables and we told many stories of how our programs and services led to more fulfilling lives. Although we tried hard to limit the amount of discussion in board meetings around operational quality issues, we did provide lots of operational and management information between board meetings in the form of briefing books. This allowed us to keep the board informed, but also kept them focused on the major strategic issues during board meetings.

Ethical practice in a social service organization which is executed at the highest level of quality also dictates how employees are managed, evaluated and developed. The CEO can assure the board and the organization’s constituency of these by managing employees consistently and fairly. I made it a point to include senior staff in board meetings by having them give topical reports. We included board members in employee-of-the-year celebrations. We featured long term employees, especially those who were celebrating milestones and promotions. In short, our employees were key to communicating that their work was meaningful, their employment was joyful and they were being treated fairly. This isn’t smoke and mirrors. For us, it was a matter of integrity and honor to our mission. Providing opportunities for board members to visit program locations, to see first hand our services are delivered and to interact with employees at every level also provided assurance of ethical and fair treatment of employees.

Practical Reasons

The board’s role is not limited to control and supervision. In the beginning stages of a nonprofit’s existence, a board is likely to be made up of individuals who function as worker bees to assist the organization in getting its work done. This is particularly the case in start-up boards that, for example, help draft the organization’s articles and bylaws, draft operating documents, hunt for supplies and equipment, and procure funding. Before staff is hired, board members often manage the daily affairs and run the programs of an all-volunteer organization. They wear various hats depending on the needs of the moment.

In most nonprofits, as soon as the situation allows, the board hires the first staff person — often the first chief executive — and delegates the daily affairs to him or her, with the necessary support and guidance. At this point the board can devote more of its time to governing, providing direction, and ensuring that the mission of the organization stays on course. As organizations grow and mature, the board’s role should become increasingly focused on governing by staying attentive to its fiduciary, strategic and generative responsibilities. The lines between governance and management become much more distinct. If questions of authority arise, a capable CEO will work with the board to clarify the difference and to redirect inquiries about management practice into matters of governance.

The board also represents the stakeholders of the organization. In early stages of the organization’s life a board that reflects the constituency and its needs is probably better able to steer the organization in a direction that is helpful to those it serves. However, as organizations grow and mature and as the needed skills and assets required of the board become more sophisticated, a simple model of representation may not be of greatest benefit. In this regard, the CEO can help the board be mindful of its own evolution and provide tools and means for the board to assess its own status and to address those through an effective processes of director evaluation and candidate recruitment and vetting. 

I believe it is a primary responsibility of the CEO, regardless of how the board has determined to identify and elect new board members, to make sure that there exists a pool of potential board members who met the criteria and who possess skills, knowledge and experience that would align with the needs of the board. In other words, I always wanted to make sure that the board’s governing or nominating committees had a number of highly qualified candidates. While directors will often recommend well-intentioned friends and acquaintances, making sure that the qualities of sought-after recruits fit with the board and its needs was something I needed to attend to. As my old mentor used to say, “If I don’t have anything to say about who goes on the board, then I am a deserving victim of my own poor leadership.”
 
The perspectives that board members bring to the boardroom should complement those of the chief executive. Together, they should be able to ask the probing questions necessary to avoid stagnation and keep the organization moving forward. This generative function can be supported by the CEO in planning focused questions and issues for the board to address and by providing learning opportunities for the board so members stay current in the organization’s areas of service. This even included, on one occasion, holding a board meeting in the Dominican Republic so directors could observe first hand our international partnership and the outstanding work they were supporting. Shaping the subject and content of the conversation was a very important tool I used to make sure the board was focused on essential issues. Ultimately, I viewed the board’s greatest resource to be its intellectual capital and I wanted them to spend it freely in generative discussions about the organization and its future.

A seasoned CEO is likely to have many connections, associations, affiliations and acquaintances in many different groups. However, I’ve never met anyone who knows everybody with potential to help their organization. I’ve never heard anyone say, “I don’t need more donors or experts in my field.” Extending this executive expectation for connectedness to the board, CEOs will seek board members who can expand the CEO’s networks of individuals and organizations that can bring support to the organization. Moreover, educating and coaching directors on how to professionally and appropriately make connections on behalf of the organization is something the CEO can take responsibility for.

Finally, the board is the body that provides continuity to the organization. Individuals come and go but the board as an entity remains. When good practices are institutionalized, the changing of the guard does not adversely affect the good work that has been accomplished. The CEO can help provide such continuity on the board by managing election, orientation and onboarding processes. But the CEO can also make sure that the board regularly reviews the CEO’s succession plan and updates it as necessary so that the board can act quickly and decisively when necessary to ensure continuity in the executive function. 

Why do I need a board of directors? Because you have to have one? OR, is it because you have come to see the tremendous value a board brings to you and your organization and, therefore, you really want to have one! 

Resources

The Minnesota Council of NonProfits is one among many state-wide associations that disseminate information and resources to support boards and executive directors in their respective states. An informative article on distinguishing between the work of the board and the work of the executive director:  http://www.minnesotanonprofits.org/nonprofit-resources/leadership-governance/board-basics/the-executive-director-and-board-relationship

Bridgespan is a widely respected consulting firm that focuses on nonprofit organizations, their governance, leadership and management. An excellent article on the legal and ethical duties of a nonprofit board: https://www.bridgespan.org/insights/library/boards/why-do-you-need-a-board

The Foundation Group has been empowering nonprofits since 1995. They feature regular blog posts on issues related to nonprofit board governance, such as this article:  https://www.501c3.org/nonprofits-board-directors/