Non-Profit Questions

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PPPA 6034

Managing Nonprofit Boards

Sessions 4-5

Board and CEO

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Three Approaches

  • Chait, Ryan, and Taylor:

Governance as Leadership

  • John Carver:

Policy Governance

  • Herman and Heimovics:

Board-Centered Leadership

Governance As Leadership
(Chait, Ryan, Taylor)

  • Diagnosis: CEOs are leading, boards are managing

  • Board and CEO partnership

  • Working together in three modes

Type I: Fiduciary

Type II: Strategic

Type III: Generative

  • When board performs well in all three modes (Type III board),

that is governance as leadership

Typical Questions in Three Modes

  • Fiduciary
    What will it cost?
    Will we make money?

What are the risks?

  • Strategic

Will it help us achieve our goals?

Will it open up new opportunities?

Will it impact other goals, what are the tradeoffs?

  • Generative

Is it consistent with our mission and values?

What do we want to be?

Policy Governance
(John Carver)

Diagnosis:

  • Boards spend time on trivial,
    only react to CEO recommendations, reports
  • Leaky accountability—boards go around CEO, make judgments about subordinate staff
  • Diffuse authority—line between board and management not clear

 

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Principles of Policy Governance

Board represents the owners

Board focuses on defining organization’s values

Rather than follow staff, board leads through policies that reflect values

Board policies in 4 categories:

  • Ends to be achieved
  • Means to those ends (executive limitations)
  • Board-staff relationship (delegation to CEO)
  • Board/governance process

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Board/CEO Responsibilities

  • Policy governance empowers strong CEOs, have total latitude beyond the level of board policies

  • CEO and board chair are colleagues, not employer and employee Different functions

CEO reports to board as a whole

Chair also reports to the board

Carver prefers “chief governance officer” to “chair”

  • CEO’s responsibility is to achieve ends, accountability is to do so without violating the means policies

Carver Policies

  • Policies arranged in hierarchy from broadest to more specific—different from traditional way of dealing all the way down a silo, as presented by staff (i.e., approving plans, personnel policies, budget, reports).

  • Board deals with all silos, but only to certain level of depth, delegates rest to staff.(Says boards should not approve budget, let CEO do within defined “constraints”)

  • Board usually doesn’t go beyond second level—everything below is delegated to CEO

  • Policies are explicit, current, literal, centrally available, brief, and comprehensive (board policy book)

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Ends statements

  • Clearly separate ends from means

  • Focus means on changes affecting people (mission)

  • Second level addresses consumers, products, and costs (the “swap” with society)

  • Long-range planning: Board should establish the “reason,” but should not do the planning-should “stand just outside it”

  • Evaluation of ends -- often a premature emphasis, handicapped by “academic mentality”—“A crude measure of the right thing beats a precise measure of the wrong thing”

 

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Means statement (executive limitations)

  • Pro-active requirements actually limit CEO flexibility and involve board in implementation; means statements should be in the ­negative­, saying what CEO cannot do, leave the rest to him/her

  • Start with can’t be “imprudent or unethical,” then add more detail as needed

  • Address board “worry areas” – vendor relations, treatment of customers, asset protection, indebtedness, financial condition, budgeting

  • Board should not approve budgets, personnel policies, etc.—leave to staff. Board monitors and asks “does it violate our policies?”

 

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Criticisms/Questions About Carver

  • One size fits all
  • All or nothing, too rigid, requires unrealistic discipline
  • No board involvement with mission programs, discourages giving and fundraising
  • Top-down view of organizations
  • Not possible to separate policy from management
  • Not consistent with SOX
  • Lenders would require board budget approval, etc.
  • Requires talented CEO
  • Link to organizational performance not clear
  • Can part-time amateurs really determine realistic ends?
  • Are the owners always identifiable?

Effective Nonprofit CEOs
(Herman and Heimovics)

  • Accept executive psychological centrality
  • Provide board-centered leadership

Initiate and maintain structure for the board

Show consideration and facilitate board inter-action

Provide information to the board

Promote board accomplishments and board productivity

Envision change and innovation with the board

  • Focus on external relations
  • Informal information network
  • Know your agenda (dramatize, bread crumbs, simplify)
  • Improvise, accept partial solutions
  • Use a “political” frame

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Other Issues and Considerations

  • CEO/ board chair relationship

In strategic planning

Meeting agendas

Board recruitment and development

Board assessment

Fundraising

  • Separating personal and professional relationships

  • Role of the board in executive transitions

  • CEO as member of the board, vote or no vote

  • CEO evaluations

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