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/
