The High-Performance Board

Principles of Nonprofit Organization Governance

Dennis D. Pointer, James E. Orlikoff

• Publisher: Jossey-Bass
• Year: 2015
• ISBN:
  9781119187912
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Regierung & Wirtschaft

While boards acknowledge they bear ultimate responsibility and accountability for their organizations' affairs, governance quality is often far from optimal. The High- Performance Board offers pragmatic and candid advice about what your board must do to maximize performance and contributions. The authors provide sixty-four principles designed to help your board achieve peak performance. They describe every principle in detail and present best practices and practical applications for each one. Each section of the book concludes with a board check-up-a set of questions that can be used to assess your board in light of the principles. A quick read for busy board members, this book is the ultimate board "drivers' manual."

1
Governance Basics

There are approximately 3.5 million boards in the United States. This may seem an unbelievable figure until one considers that most commercial corporations, nonprofit organizations, and government agencies have them.

This book focuses on nonprofit governance, although many of the principles presented here can be employed by boards in other sectors.

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Are Nonprofit Organizations and Their Governance Really Different?

The answer is both yes and no. Here are just a few illustrations:

The purpose of nonprofit organizations is public benefit—but the terms public and benefit are defined in a wide variety of ways. As a consequence, nonprofits are granted special privileges; subjected to distinctive laws, regulations, and reporting requirements; and often exempted from certain taxes.

Commercial corporation boards must satisfy shareholders, all of whom want essentially the same thing: a return on their investment. Nonprofit boards must meet the expectations of diverse stakeholder groups, each of whom may have very different (and even conflicting) interests.

Nonprofit organization board members are volunteers who have no direct economic interest in the success of the organizations. They don’t own stock and are typically not compensated for their service.

Yet, even given such differences, the fundamental obligation and work of all boards is essentially the same. This obligation is addressed in the next chapter.

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Boards bear ultimate authority and accountability for an organization’s affairs. They are responsible for everything an organization is, does, and becomes. Governance is an activity, an action word; it is what boards do. The essence of the verb to govern is being a steward and trustee of an organization’s resources and capacities.

Governance is a team sport. Boards exercise collective influence; their members have no individual power. Boards exist only when they meet, that is, “between raps of the gavel.” Members may disagree, they can (and should) debate and argue about issues, but if they are going to decide and act, they must do so together.

Yet governance is part-time and occasional work. Although organizations, management, and employees are permanent fixtures, boards are not. They convene for a short period of time, adjourn, and then weeks or months pass until they meet again. Their attention, time, and energy are limited and fragmented. Additionally, governance is a peripheral aspect of board members’ lives. No matter how important the issue being addressed, it is pushed aside when the meeting ends.

The Principles Behind the Principles

First, governance really matters. A board has significant impact on an organization’s success or the lack thereof. A negative illustrates the point. Consider this challenge: Your board is given fifteen minutes to make decisions that would cause the organization great harm. Could you do it? Most board members respond, “Absolutely, it would be easy and we could do it in half the time.” Does governance matter? You bet it does; for better or worse!

Second, governance is becoming more difficult. Due to the nature and pace of change, increasing size and complexity of nonprofit organizations, and greater demands for accountability, the crossbar has been raised. More is being expected of boards. In the past, appointment to a nonprofit organization board was first and foremost an honor. While this is still the case, stakeholders and clients are demanding much higher levels of performance and contributions.

Third, governance is less than optimal in most organizations. Recognizing their importance and how great they can be, we are tough on boards. The unavoidable fact is that many function far below their potential.

Fourth, board performance and contributions can be dramatically improved. Boards can make much more of a difference and add far greater value to their organizations than they do now. We have seen it happen. We’ve helped boards make it happen. But it doesn’t just happen. Improving governance quality requires a number of factors:

• Dissatisfaction with the status quo. Boards pleased with their present level of performance don’t change, as they see no need to do so.
• An image of what governance should be like at its very best.
• Significant time and energy devoted to undertaking development initiatives that must be added to that already spent governing.
• Follow through. Major change always creates back pressure for gradually returning to the far more comfortable way things were done in the past.

A transformation in how nonprofit organization boards govern must be based on specific principles that promote best practice.

Figure 1.1. Key Determinants of Governance Quality.

This book presents sixty-four such principles based on a model (presented in Figure 1.1) of factors that most affect board performance and contributions. (The principles are presented in each chapter, as they become relevant to the discussion. For a look at the whole list, see Resource A at the end of the book.)

• Obligations: the purpose of boards and value they add
• Functioning: how boards define and do their work (fulfilling responsibilities and performing roles)
• Structure: the way governance work is subdivided, shared, and coordinated
• Composition: board member characteristics, knowledge, skills, experience, perspectives, and values
• Infrastructure: resources and systems that facilitate and support the board and its work

Clearly, a host of factors affect governance quality. But these are the ones we have found to matter most. This prompts our first principle:

Principle 1

The board realizes that it alone bears ultimate responsibility, authority, and accountability for the organization. It understands the importance of governance and undertakes its work with a sense of seriousness and purpose.

Your board has no capacity for doing the organization’s real work: producing products and services that meet client needs. Additionally, it cannot manage the organization and should not attempt to do so. Yet it is ultimately responsible for both. Your board is, to quote Harry Truman, the place where “the buck stops.”

Your board must fully appreciate its obligations before it can fulfill them. Recognizing the importance of governance is a prerequisite for doing it well. Few people are willing to devote large amounts of time and effort to activities they deem insignificant.

We’ve worked with boards whose members believe governance is trivial, relatively inconsequential to the organization’s success. We have worked with boards where members are either unable or unwilling to devote the necessary time ...

Table of contents

• Cover
• Table of Contents
• Title
• Copyright
• Dedication
• Figures and Check-Ups
• Preface
• About the Authors
• 1: Governance Basics
• 2: Obligations
• 3: Functioning Responsibilities
• 4: Functioning Roles
• 5: Structure
• 6: Composition
• 7: Infrastructure
• 8: Transforming Your Board
• Resource A: The Sixty-Four Principles
• Resource B: Illustrative Board Policies
• Resource C: Sample Committee Charters
• Resource D: Illustrative Board Chair Position Description
• Resource E: Illustrative Governance Principles
• Resource F: For Further Reading
• Index
• End User License Agreement