THE BOARD MANAGEMENT COMMITTEE: Systems and Accountability at the Highest Level of a Nonprofit Organization
One of my favorite parts of my profession as a consultant is catching organizations doing things exceptionally well. The more difficult part is when I see organizations doing great work but struggling on many fronts. Below is a tale of two organizations whose effectiveness is a direct result of how their respective Boards are structured and, consequently, how well they function.
CHARACTERISTIC OF EFFECTIVE LEADERSHIP
One of our nonprofit clients is a top-notch organization that is excelling by any and all measurements. Characteristics include:
The development department has a strategic approach to building long-term relationships with donors, all of which is monitored and evaluated (but not directed) by the Board’s finance committee.
They have a systematic approach with high accountability.
There are subcommittees of the Board that likewise monitor and evaluate program effectiveness, administration, compliance, and human resources.
The organization has had a great CEO who is getting ready to retire. The Executive Committee of the Board is currently engaged in interviewing and vetting his successor.
What they really excel at is recruiting tough, smart board members who focus on setting policy and overseeing their fiduciary responsibilities according to the federal statutes for public 501(c)(3) charities.
The Executive Committee supervises the CEO and the various functions of the organization but are very aware of the boundaries of their involvement. The Executive Committee focuses on vertical accountability.
A Board Management Committee is tasked with monitoring and regularly evaluating Board performance. The Board Management Committee focuses on horizontal accountability of the Board.
As you can see from the short list of Board characteristics, they are very serious about systems, policy, and accountability. It is among the best-led organizations with which I’ve ever been involved.
Below is a composite example of several organizations that are also focused on doing great work but are hindered by the problems that commonly exist at the highest levels of leadership. This is not necessarily the story of a particular organization but various aspects that can apply to many nonprofits.
It would not be unusual to find a nonprofit that is struggling with their fundraising. However, example nonprofits I have in mind are under-performing their peers in almost every way, including fundraising.
There is a higher than usual staff turnover.
Board members are irregular attendees at scheduled Board meetings.
Long-term donors are getting restless; some are no longer giving.
The organization seems to be purely reactionary when it comes to strategic planning.
Fund-development has begun focusing exclusively on gifts of immediate cash. Planned giving is usually a reflection of long-term planning.
That’s a pretty harsh prognosis for an organization I consider to be doing great work.
MORE THOROUGH ANALYSIS
The primary issues in the previous example seem to be the formation and function of Board of Directors. To begin with, the CEOs recruited most of the Board members because they were friends or major donors. It’s difficult to confront old friends and hold them accountable for their voluntary service. And just because someone is a generous donor doesn’t mean they are willing or able to perform the tedious duties of Board oversight. Many times they are not and do not.
Secondly, the CEO wines and dines Board members, takes them on weekend trips, and meets with them individually to discuss aspects of the organization. There is the occasional reminder from the CEO of how much more he/she could be earning in the for-profit world. A not-so-veiled threat of leaving.
Thirdly, when an organization is under performing on every front, fingers can be pointed in all directions. After several rounds of assigning blame followed by hiring and firings to remedy issues in HR, program, admin, and fund-development, there was no significant change. My analysis (one that no one wanted to hear) was that the problem was systematic, and it began with the Board.
Because of the cozy relationships between the CEO and the Board, accountability throughout the example organizations were minimal at best. Neither had the position nor disposition to challenge the other. Though the Board was made up of some excellent and generous business leaders, the roles, expectations, and standards for Board membership were not well defined, let alone explained and regularly evaluated.
BOARD MANAGEMENT COMMITTEE
Among the characteristics of the best-led organizations I have seen, it’s really the Board Management Committee that sets them apart from rest. This is a standing committee from the Board of Directors and commonly chaired by a previous Board Chairman. Their sole responsibility is to vet candidates on Board member requirements and expectations. All potential new Board members are required to sign a participation pledge. The Board Management Committee also regularly evaluates members on attendance at scheduled meetings, committee assignments, and team participation.
Board Management Committees are frequently established to monitor Board performance at colleges but are pretty rare at other nonprofits. Among findings in the most recent survey of nonprofit Board Chairs and CEOs (Leading with Intent: 2017 Index of Nonprofit Board Practices), one of the most significant needs for improvement is identifying conflicts of interest among Board members. While there are also a lot of survey statistics regarding formal CEO-performance evaluations, performance evaluations for Board members were typically based on their own self-reflections.
The primary responsibility of a Board of Directors is fiduciary oversight of a public trust. The Board Chair (along with fellow Board members) operate on different sides of the fulcrum from the CEO and staff. Federal tax law gives tax-free status to charities because Boards are the internal guardians of integrity. They are in place to protect and ensure the public’s trust. These are not rubber-stamp positions. If there is ever any doubt among Board member about ownership or stewardship of charitable contributions, some have found themselves in federal court with a U.S. attorney explaining in painful detail meaning of “public trust” and “lack of fiduciary oversight.”
It’s hard to say that Board Management Committees are among the best practices at leading nonprofits because they are actually not that common in the public sector. Nonetheless, they are in my experience a characteristic of the best-led organizations around.
Eddie Thompson, Ed.D., FCEP
Founder and CEO, Thompson & Associates
Copyright 2018, R. Edward Thompson