Good News Bad News for Boards & EDs

Listen up, nonprofit leaders! I’ve got good news and bad news.

I’ll start with the bad: according to Harvard Business Review’s April 2013 issue, corporations share many of the same governance issues that nonprofits do.  It’s both disheartening and comforting to know that good Board leadership and governance is hard to create, manage and sustain in any sector.

The good news is that the issue – and specifically the article “What CEO’S Really Think of Their Boards” – offers some sound advice for both Directors and Executive Directors/CEOs.

First, the article suggests that Directors:

1. Focus more on the risks that are the most crucial to the future of the organization. Don’t shun risk or see it in personal terms.
2. Do their homework to understand the issue/industry the organization addresses.  And, stay consistently plugged in.
3. Bring character and credentials, not celebrity, to the table.
4. Do more to challenge strategy constructively.
5. Make succession less, not more, disruptive to operations.

 

One of the most powerful revelations presented in the article came from former SEC chairman and Aetna CEO William Donaldson: “The Board is a social entity.  And the human beings on it – they act like human beings do in groups. The longer individuals are there, the more allies they have, the more they have their dislikes, the more irrational they become in terms of personal conflict.”  He’s amazed that more work has not been done to illuminate “the social contract within a board.”

Donaldson’s comments underscore two key similarities – and often functional roadblocks – in corporate and nonprofit Boards: ownership and the importance of relationship.  Directors of public corporations do not own the companies they are directing.  They sit in their Director roles in service to the shareholders of the company.  Nonprofit Board members also do not own the organizations they lead and are in service of their stakeholders (or beneficiaries of the nonprofits programs and services).

Regardless of the sector, Directors must put aside personal agendas when they step into a Board meeting and abide by the social contract they hold with one another and their shareholders/stakeholders.

The article concluded by identifying three key takeaways:

1. The entire organization will get more value if the partnership between the CEO and Board is strong.  If governance isn’t working, it’s everyone’s job to figure out why and to fix it.
2. Most boards aren’t working as well as they should.  Although governed by bylaws and legal responsibilities, interactions between CEOs and Directors are still personal, and improving them often requires the sorts of honest, direct and sometimes awkward conversations that serve to ease tensions in any personal relationship.
3. The best leadership partnerships are forged where there is mutual respect, energetic commitment to the future success of the organization, and strong bonds of trust.  Great boards support smart entrepreneurial risk taking with prudent oversight, wise counsel and encouragement.

I encourage you to share this summary in your next Board meeting packet and set aside some discussion time to explore everyone’s thoughts and reactions to the article’s findings.  Perhaps doing so could present you with a wonderful opportunity to strengthen your partnership and refine your collective focus for the rest of 2013.

If you would like to read the entire article, please feel free to stop by Spokes.  And, as always, if your organization would like a little extra encouragement, coaching or assistance in facilitating these sometimes daunting conversations, Spokes is here to help.  Just call – 805-547-2244!