Powering Organizational Performance through Board Governance:
Four Steps to Optimizing Nonprofit Boards
Too often, boards of not for profit organizations are employed primarily in the realm of fund-raising and advisory functions, wasting a clear opportunity to strengthen the performance of the organization. Boards made up of highly skilled and dynamic professionals may feel their time and skills are wasted, as they wonder what their real purpose is on behalf of the organization. From a survey of more than 900 nonprofit directors, Stanford researchers have identified a number of findings that suggest nonprofit boards are lacking in structure and could benefit from improved clarity of purpose and governance structure (1). These findings include:
- 90 percent of directors say that fund-raising is their primary duty or at least as important as all other responsibilities (in those organizations that require directors to fund raise)
- 69 percent have experienced at least one serious governance problem in the past 10 years;
- 69% of the boards do not have a succession plan for the CEO or Executive Director, and 23% have experienced a CEO / Executive Director termination or unexpected resignation;
- 32% are not satisfied with the board’s ability to evaluate the organization’s performance;
- 27% say that fellow board members lack a strong understanding of the organization’s mission and strategy;
There are four primary areas in which nonprofit Board governance can be strengthened in order to maximize the Board’s value to the organization:
- Board Development. The makeup of the board and the individual skill sets of the board members should be consistent with the needs of the organization for the present and the future. Board re-generation processes should be dynamic and perpetual; with clear guidelines for term limits (for board and officer service), board nominations and board orientations.
- Clarity of Purpose and Evaluation. The board should be very clear on its role and oversight responsibilities. By-laws and board policies should be clear and relevant; and a purposeful board self-evaluation process should be established that informs board education and annual goals.
- Board dynamics. As with all teams, boards should operate in an environment of trust, where debate and honest communication can occur and support the development of consensus decisions or at least the ability for the entire board to support the ultimate decision. There should be an open and honest relationship between the Board and the CEO based on mutual respect and trust. And the Board should understand that the CEO is its only employee, and one whose performance should be evaluated based on organizational performance.
- Board Oversight. The Board should be very clear on how its oversight responsibilities are realized, supported by an annual calendar. This should always include timely CEO evaluations which offer value to the incumbent CEO; as well as CEO compensation and succession planning disciplines. The board should offer significant insight, challenging mindsets and establishing organizational culture from the top. While the CEO is responsible for all business frameworks such as strategic planning, risk management, disaster recovery, succession planning and communication strategies, strong business and professional backgrounds of the board members will contribute to the caliber of these frameworks.