Over the past decade, numerous scandals in high profile nonprofits and business corporations across North America have been attributed to failed governance and have spurred demands for more effective and accountable governance.
At the same time, aggressive promotion of John Carver’s “Policy Governance” model prompted many boards and executives to try it. Many found that it was simply not a comfortable fit for their organization, so they “mixed and matched” with other models without a systematic rationale.
Like many of my peers, I invested considerable energy examining what boards were doing to improve themselves. In the mid-90s, while Iwas working as executive director of one of the largest nonprofit child welfare agencies in Canada, our board spent about 18 months researching approaches to governance. We found some of Carver’s ideas useful and others that simply didn’t fit us. Others who had tried to implement it fully complained thatit put unnecessary distance between the board and the organization it governed, left board members feeling alienated, consumed a lot of board time and eventually created a backlash against the reform. Our nonprofit ultimately developed a hybrid model, taking what we believed were the best practices derived from several sources.
“What is governance anyway? What alternative models are there?” These are some of the questions I repeatedly heard during my 30-year career in public service, which included extensive experience as a grantmaker, executive director of a large nonprofit, and member of many nonprofit boards. In 1999, as I was embarking ona third career of research and consulting, I decided to explore these and related questions in more detail.
A review of the literature led me to conclude that alternatives to the Carver “one size fits all” Policy Governance model were not broadly known nor lodged within a coherent framework that would guide their appropriate use. My curiosity about what people were doing that worked led me during 2000-2001 to conduct in-depth case studies on the governance practices of 20 nonprofit organizations across Canada to identify commonly used governance models and factors that influenced their approaches to governance. An outline of the eight models we identified is provided in the “Governance Models” box.
We didn’t find a coherent, flawless “model.” Only 20 percent of the organizations in our study used thetraditional model characterized by delegation of management to an executive director and organization of board committees (and meeting agendas) around basic management functions (finance, human resources, programs).
We did find inventive diversity. It became quickly apparent that many boards had developed “hybrids,” employing a mixture of practices that uniquely suited them. It seems to work well enough—certainly better than trying to follow any one prescriptive model.Many of the “rules” contained within rigid, prescriptive models such as Carver’s fail in practice because they don’t accommodate themselves to unique organizational circumstances.
One finding from our research illustrates the limitations of prescribing specific governance practices. I went into the research with the view that it was never good to have the chair (or other board member) step in as executive director during a period of transition. What I found was this actually happened in five of the 20 organizations we looked at, without the universally disastrous results I would have predicted. The key to making this work was to ensure that the board member resigned permanently from the board.
This research led us to the conclusion that there are no “magic bullets”for good governance. Boards, like their organizations, have different characteristics and needs. Nonprofit leaders need to have more exposure to a range of options to make informed choices. This does not diminish the value of theoretical governance models.
Carver’s distinction between board-established organizational “ends” and management-driven “means” of implementation has helped many organizations clarify the respective roles of their board and executive director.
But what Carver does not fully acknowledge is that there is something in every well-functioning organization that Houle has called the “zone of accommodation” that is the overlap between roles (governance, management and the actual “staff” work) that needs to be negotiated and remain flexible. For instance, boards and executive staff need to partner in establishing the ends (goals) for an organization. Many boards can’t develop “ends” policies on their own without the executive director because they don’t know enough about the organization and its internal workings.
Two-thirds of Canadian nonprofits function with $100,000 or less and almost 50 percent with $50,000 or less. So the majority likely have board members involved in some management or staff functions in addition to governance. Realistically, small organizations don’t have a full complement of managers or staff. Within a span of five minutes a board member may wear all three hats—make a decision to develop a major donor program (governance), reconcile the month’s accounts (management), and finally, sit down to design an event leaflet (staff). So it is with many young and small organizations. But such hands-on involvement can go too far, as with the case of an organization with an annual budget of $10 million where board members who were parents of its developmentally handicapped clients were super-managing programs and reporting directly to the board, effectively cutting out the executive director in many respects. The resulting turnover of seven executive directors in 10 years could have been prevented by governance practices better suited to the size of the organization.
Clear agreement between the board and executive director on their relationships and respective roles is essential to an effective governance partnership. The size of a group, its complexity, its geographic scope, personal or political agendas of board members are all factors we found in our study to influence a board’s approach to governance—but not always in the best interests of effective governance.
Much of a board’s success was in the quality of relationships on the board and between the board and the executive director—in the dialogue as opposed to the structure. This is where many approaches to board development go awry. They focus on the wrong things.
The structure of an organization is found in its bylaws, policies and role descriptions for boards, officers, committees and staff. These may be written or passed on by oral tradition. It’s really important that everyone is on the same page about such questions as “What’s the role of the board?” In some cases people forget about written rules, such as “What constitutes a quorum?” and end up functioning entirely on trust. A Lions Club in the study raised $15,000 a year for 40 years to support community projects but couldn’t find their bylaws and couldn’t remember whether they had any. One board member said, “I’m sure we have them… I think they’re in my dad’s basement, but he’s ill, and I don’t know where we’d begin to find them.” They worked successfully without reference to the bylaws because the basic traditions were communicated orally. While this may work in a homogeneous culture, we don’t recommend such an informal approach.
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Even when you do have clear structure, unless it lives day to day in your board work, it dies as an effective tool. One organization in this study thought it had a pretty good orientation system for board members. Four new directors that I interviewed had been through this orientation within the previous six months—two couldn’t remember it at all. The other two couldn’t remember one of the fairly significant requirements—that they give the organization priority in their charitable giving. This revealed the importance of recognizing individual learning styles and integrating visual, oral and experiential learning and regular repetition of things you want people to remember in the course of their work.
This brings us to the issue of “ownership”—an important issue in organizational life too often unexplored on an explicit level by nonprofits. We view “primary” owners as those who select the board. This in itself should cause many nonprofits to examine their selection processes and the way in which the board is constructed. But few nonprofits have addressed this issue or what happens when interests of various stakeholders conflict. Identifying “owners” is essential to establishing proper accountability mechanisms and open lines of communication with stakeholders.
A common vision, trust, and common goals—if you don’t have these, sound structure won’t necessarily protect you from poor governance. But it may help you sort your way out of problems. Any organizational structure can work if there is good will between the parties. Structure is a fail-safe, a safety net, a back-up. When a board expands or diversifies, explicit structure can ensure that the rules of engagement are clear for everyone. Often if you add one new person to a board it’s a whole new board. And when things really break down—for instance, if a board is picking at the executive director’s authority, or if a member is dominating with a political or personal agenda—it’s important to have everything on paper, such as clear lines of authority and job descriptions. But structure still won’t save you if the relationships break down—honest and constructive relationships are essential.
Organizations don’t exist to be governed, but governance plays an important role in how many organizations function. Our definition of governance is “the processes, structures and organizational traditions that determine how power is exercised, how stakeholders have their say, how decisions are taken and how decision-makers are held toaccount.” There is ample anecdotal evidence that the work of nonprofits usually continues in spite of flawed governance. The job still gets done! Yet there is also evidence  that governing boards can enhance organizational performance by understanding and undertaking the governance role in a manner suitable for their particular organization. They carry the public (or membership) trust and provide an accountability structure for management. The importance ofgovernance grows with the level of public interest and investment in an organization.
The “Results-Based” approach to governance is one emerging “hybrid” model identified in a nonprofit that participated in our study. Some elements of this approach also appeared in a second nonprofit. The model employs a small number of committees structured around governance rather than management responsibilities. The executive committee (poorly used in many nonprofits) carries responsibility for leading strategic planning and evaluating the executive director’s performance. A “governance committee” is responsible for regular review of bylaws, governance policies and practices as well as board member recruitment, development and evaluation. Risk management and quality audit committees ensure establishment of clear measures of organizational performance in key areas, monitor and audit performance and report on results. The ends/means duality ismaintained with recognition of the need for a flexible partnership between theboard and executive director. The results-based approach moves away from themore traditional governance approach where a board organizes committees around management functions.
Drucker has suggested that a board cannot do its job without meddling, “so it had better be organized to meddle constructively.” This model appears to have evolved to assist boards in meeting this challenge. It acknowledges a legitimate board role in “operational” activities such as development of public policy. It also legitimizes board involvement in management functions that might be necessitated by critical events or transitional phases. It reorganizes board structure to focus on clearly defined board responsibilities and the measurable results of organizational activities and management processes.
The critical elements of good governance lie in
- creating a vision,
- securing resources,
- defining clear roles and responsibilities,
- establishing benchmarks for performance,
- monitoring them, and
- accounting to key stakeholders for the organization’s direction and performance.
Most nonprofit leaders know that every organization has its own culture and unique set of circumstances. The challenge, then, is to be informed about alternative approaches to governance and understand the factors that need to be considered in designing a governing system that works best for an organization. The case studies revealed that determining a governance approach that’s right for a particular organization clearly requires more than selection from a menu of available alternatives. It requires a creative application of practical knowledge and a basic understanding of how various concepts of governance fit your particular organization.
- Carver, John. 1990. Boards That Make a Difference. SanFrancisco, CA: Jossey-Bass.
- This article is based on “Governance Do’s and Don’ts: Practical Lessons from Case Studies on Twenty Canadian Nonprofits,”which assessed their governance practices over a 10-year history. The study sample contained organizations from several nonprofit sectors. The median budget size was approximately $3 million. The full report, related research and strategies to strengthen governance are available from the Institute On Governance, Ottawa, Canada at (www.iog.ca) or by contacting the author, 613-837-8757 or ([email protected]).
- Houle, Cyril. 1989. Governing Boards: Their Nature andNurture. San Francisco, CA: Jossey-Bass. page 96.
- See literature review in Herman, R.D., and Renz, D.O.2000. “Board Practices of Especially Effective and Less Effective Local Nonprofit Organizations.” American Review of Public Administration. 30:146-160.
- Drucker, Peter. 1990. “Lessons for Successful Nonprofit Governance.” Nonprofit Management and Leadership. 1(1): 7-14
Mel Gill is president of Synergy Management and Consulting Associates (www.synergyassociates.ca) and an associate of the Institute On Governance, Ottawa, Canada.