Reaching governance nirvana on a nonprofit board
Despite significant growth and professionalization, the nonprofit sector continues to experience scandal and corruption. Nonprofit violations of public trust are detrimental to the public that finances their work, the individuals that depend on their services, and the staff that is committed to their mission.
So, who is responsible for ensuring accountability and responsible stewardship of nonprofit organizations? And where are they going wrong?
One day old or decades old, the fundamental responsibility of a nonprofit board of directors is to honor the mission of the organization by voluntarily serving as financial and strategic stewards of the nonprofit entity. While this responsibility never changes, the governance dynamics and board activities evolve as the nonprofit matures and grows. Miriam Wood has developed a framework that describes a cyclical behavior pattern of nonprofit boards. Her theory condemns a nonprofit to a routine of building, crisis management, stabilization, lethargy, repeat. While this may sound very familiar to many of us, we can not accept this pattern as the status quo – rather we need to look to better management strategies to anticipate and mitigate to potential weak points in a board’s maturation. As Wood describes, a nonprofit board should strive to reach and maintain “governance nirvana,” achieved at a peak point of stabilization in the organization.
At governance nirvana, the board has established processes and professional practices to ensure oversight and on-going management of the organization’s strategy. Board committees become less sporadic and engage directly with functional staff leaders to monitor performance and provide strategic forward-looking guidance. The overall organizational culture prioritizes the mission of the organization above individual pursuits, allowing for a more open dialogue about tactics and performance.
To reach governance nirvana and maintain you need effective governance. Effective governance should not be an afterthought in creating a new nonprofit organization, nor should it be neglected after years of operation. A board should focus on four basic priorities:
Strategic issues that are critical to the organization’s success, while not getting into the weeds
Results driven performance evaluations that are linked to timetables
Clearly defined and communicated measures of success
Establishing channels for on-going engagement of internal and external stakeholders
This set of priorities requires a committed board of directors that are doers and bring specific skill sets that are activated to support the organization. This starts with board recruitment, where many organizations prioritize social clout, financial resources and influencer reach over more strategic expertise. A high-profile board member certainly brings value, but also usually has little time for the organization outside of the board meeting. Given the importance of a committed and attentive board, organizations should consider separating the board of directors (individuals responsible for the financial and programmatic success of the organization) and the influential champions (individuals that can raise the profile of the organization and help meet financial targets). This structure allows both groups to play to their strengths without putting the organization at risk from a loss of oversight.
While no organization can completely avoid a crisis, effective governance can help anticipate market risks, monitor operations to prevent fraud, and respond quickly to emerging threats to minimize any damage to stakeholders and the organization’s reputation. Take the board of directors’ role seriously because ultimately, the board is responsible for both the wins and the mistakes of a nonprofit organization.