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For an Effective Board

All of our organizations have Boards of Directors. But how many have a Board that's really effective? Too few. And that is a real problem. Here's an approach to make them more effective.

It begins by making sure their role is understood. Boards and their duty may be the most misunderstood aspect of organizations. Find a random organization's bylaws and study the board section. Do you see clear direction or cliches and vagueness?  The Ford Foundation's bylaws provide no purpose for its Board, they only provide for the election of board members. Many, like NPR, provide a passive statement that the Board "...may exercise all powers of the Corporation and do all the lawful acts and things as are not...to be done by members." The Nature Conservancy and Red Cross also follow this model. These are vague and lack the clarity found elsewhere within these organizations.

And that's the core of the problem. A board that doesn't know its job is unlikely to provide effective leadership. I think it goes with out saying that it does not bode well for an organization to have confused leaders.

This issue is not theoretical as it leads to real trouble in both not-for-profits and in for-profits. Nationally, an A-list of not-for-profits, and for-profits, have gone through scandals attributable to low performance boards. North Carolinians were stunned to see the United Way of Charlotte go through a painful public pay scandal. Wilmingtonians are shocked to read of the travails of New Hanover County Community Action as outlined in a series of Star News articles. None of the problem organizations are performing at the level their communities need. 

Governance Responsibility

In each instance the Board failed to meet its Governance Responsibility. It is the board's duty to govern the organization in a manner that makes it succeed. The root of the 'problem' for all of these organizations is the failure to recognize that duty and accept the responsibility of governance.

United Way of America, which has had its own problems in the past, now has a clear charge to its board in its bylaws. It states broadly and simply: "Your United Way’s CEO and board of directors are ultimately accountable for your organization’s performance, reputation, and stature in your community." Does your board take responsibility for the organization's "performance, reputation and stature?"

Taking on this responsibility is not easy. It means doing the necessary preparation for decision making and it means asking the difficult questions.

• Does the organization have a clear purpose? Neither a Fortune 500 company nor the local nonprofit can be all things to all people. Each organization is much more likely to succeed if it has a very clear idea of what it is supposed to do. Focus is good.
• Is that purpose still a priority? Making buggy whips in a time of cars or photographic film in a time of digital cameras might not be a good strategy. Raising funds to research a cured disease might not be the best use of time, talent and treasure.
• Are the finances and organizational structures in place to accomplish the purpose? It's hard to achieve a goal without the necessary funding or organizational support.
• Is the organization doing the things necessary to grow the organization? It's hard to realize an increase in services if there is no plan to raise money and support.
• Does the Board want to hear what is actually happening or just the happy talk? Alan Mullally, the President of Ford Motor Co. and then new from Boeing, had to read the riot act to his senior staff at Ford when they all showed up and told him there were no problems. "You guys, you know we lost a few billion dollars last year." By forcing the conversation to the difficult issues he got real problems addressed. Ford didn't need bailout money.

These are tough questions and asking the tough question is not easy. Warren Buffett speaks of this in his biography The Snowball. At Coca-Cola's board "...the atmosphere was such that it didn't lend itself to questioning. You just had the feeling when it got to be noon that it would not be at all polite to keep raising subjects or talking about things that would cause the meeting to last until one o'clock."

Calling on a board to meet its Governance Responsibility does not preclude board members from contributing in other ways. Organizations will always look to the 'time, treasure and talent' that board members can bring to the organization. But the board members and the organzation must appreciate that it is only when the board members come together as a board meeting its responsibilites that the board members take on their full service to the organization.

"Give an account of thy Stewardship"

These challenges are not new. The King James' version of the Bible raised the point at Luke 16:2. "And he called him, and said unto him, how is it that I hear this of thee? Give an account of thy stewardship; for thou mayest be no longer steward."

Ultimately, for a board member, the question is about his/her stewardship while on the board. Did the member ask the important questions or find they were just concerned about being 'polite?' A board member needs to be willing to ask the extra question even if it is frowned on. You might get a disapproving look for asking the extra question but you will have the satisfaction of improving the organization's success and service to its stakeholders.

Paul 

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