Every year, as my “Governance and Leadership” class in the Masters in Nonprofit Leadership program progresses, students’ frustration with boards’ failure to understand and execute their job builds over the duration of the course increases. As the students’ understanding of what a board is really supposed to do increases, they start comparisons with their own boards (past and present), see the gap and start to ponder how and why it so routinely exists.
As is the pattern, students’ thoughts started to coalesce at the mid-point of the semester, and by the end of the class, every student lands in the same place: nonprofit board members and the collective board need more education. This year, several students went so far as suggesting that it be legally mandated, although they couldn’t figure out who would do the mandating and the monitoring, nor what the consequences should be for failure to do regular education.
I was thinking about this when I received the National Association of Corporate Director’s (NACD) infographic from its most recent survey of 500 corporate directors of public companies. The results are proof, yet again, that despite what “they” would have us think, for-profits do not do all things better than nonprofits. Governance, however, is one of those areas where few have doubted that. The infographic shared the top 11 concerns of corporate board members. It was no surprise how many should show up on the list drawn up from a similar survey of nonprofit board members. Not all 11 are applicable to nonprofit boards, but those that are… well, judge for yourself.
The first to jump out at me was the following statement: “2/3 of directors agree that short-term pressure from external sources compromises management’s focus on long-term strategic goals.” I actually laughed when I read this, as there isn’t a nonprofit that has actually set long-term goals that doesn’t face this challenge on a regular basis and do exactly the same thing.
The strategic priorities are established, but then along comes a funder asking you to do X, or there is a sudden crisis in your service population, or the economy tanks or…or…or. And what happens? Everyone jumps. But, what was the purpose of going through the planning process and establishing those SMART goals if the organization was going to ignore them? What was the purpose of being rational and proactive only to end up being emotional and reactive? Seems both sectors are equally prone to this less than smart behavior. It is a board’s job to make sure this doesn’t happen.
Another point that had me smiling was this: “more than half of directors think it important to improve the quality of dialogue with management and the quality of management reporting.” Heck, I’d settle for there just being dialogue instead of monologue: management talking at the board for most of, if not the entire board meeting. While apparently board members from both sides of the aisle, so to speak, think they get a lot of information, they don’t feel they are getting the information they need.
When I tell boards that they need to determine, and then request, the information they need to do their job rather than simply accepting the information management chooses to give them, I get bewildered looks. Then, slowly, the beginnings of empowerment take hold. I am a huge critic of the vast majority of executive director reports to the board, as they, too often, are a justification of their job rather than providing information that allows board members to understand what is happening at the organization and highlight the issues/areas where they need to step up.
Related to this are two other findings from this survey. First, just 45% of the directors say they have a “high level of understanding of the mood in the middle” or the organizational chart, and just 27% say they “understand the buzz at the bottom.” One of the greatest costs to any organization—for-profit or nonprofit—is the cost of turnover. Failure to understand the culture at all levels of the organization, to know whether the cultural expectations set by the top (the board) are being played out throughout the organization, is the mark of an underperforming board. Almost 70% of respondents said “that their boards need to strengthen monitoring of strategy execution.” There are few things that are more demoralizing to staff than to have been put through a strategic planning process and come up with what is thought of as a good plan, one that may even cause something like excitement, only to have that plan be ignored, side-stepped, be that thing that shall not be named.
Perhaps one of the most interesting outcomes from this survey are the five trends that these corporate directors say will have “the biggest impact on their companies.” Any nonprofit board members would be hard pressed to argue that these same five aren’t going to impact their organizations. They are:
- Change in regulatory climate. Nonprofits still don’t know the impact, if any, of the 2017 changes to the federal Tax Code, that same bill opened more discussions about different ways to “tax” nonprofits (i.e., “excessive salary,” benefits, PILOTs, UBITS)
- Economic slowdown. (We all remember what happened during the most recent recession.)
- Cybersecurity threats. (With organizations being held from ransom, need any more be said?)
- Business-model disruptions. (Think impact investing, pay for success, social enterprises.)
- Geopolitical volatility. (While I would think this would speak for itself, in case it doesn’t, think war, humanitarian crises overseas, cost of tariffs passed on to the consumer reduces people’s discretionary funds, etc.)
To end where I started: “the average director spends 245 hours in the director role but only 20 hours on director education.” I bet my students would say, “That would be awesome if board members spent 8% of their time being educated about their job.” Really?
For-profit board members spend an average of 20 hours a month on their corporate director job? Impressive. When I ask nonprofit boards/board members how many hours it takes, on average, to be a good, hard working member of the board, I routinely hear seven to 10 hours. So, kudos, for-profit board members, on the 20 hours (assuming you are working on the right things). I would be thrilled if boards spent two hours a month on learning what it means to be a board member, understanding the pieces of the job, how to put those pieces together, how to become an awesome board member. And I’ve no doubt the organization would receive a noticeable return on that investment.