The High Value Board
Conventional wisdom dictates that a highly engaged, active Board is indispensable to a successful nonprofit. Accordingly, nonprofits invest considerable time and energy in Board development, training and engagement. But, as I described in Five Myth About Nonprofit Boards, this understanding of Boards is rooted in faulty assumptions and unrealistic expectations.
In fact, focusing on Board engagement and activity allows us to avoid far more important questions about how well a Board is serving its nonprofit. What are the specific needs that this activity is intended to address? How well equipped is the Board to provide what the nonprofit requires? How much is the nonprofit investing in its Board relative to what it’s getting back?
Emphasizing what Boards provide, rather than what they do. . .
Appreciates Board activity as a means towards the success of the nonprofit, not as an end in itself.
Means that it’s essential to balance the resources devoted to supporting the Board against the benefits to the organization.
Opens up the possibility that many Boards may actually be doing far better by their organizations than we think.
Net Value
A high value nonprofit Board is one that provides the most benefits to its nonprofit at the lowest costs. Benefits are anything that strengthens the nonprofit’s impact while costs are the time, energy, stress and financial costs the nonprofit and its staff spend on the Board. So Board value increases when either benefits increase or costs are reduced. Benefits from the Board can be designated as either primary or ancillary:
Primary benefits are those which can only be provided by the Board of Directors:
Legally, Boards must provide financial oversight, including authorizing expenses, and oversee the senior staff leader.
Externally, the existence of the Board offers an indispensable sign of the nonprofit’s legitimacy.
Within the organization, Boards offer a check and balance on the power of the Executive Director. Absent the Board, an ED would have unrestrained power which might be abused to the determinant of the organization, staff and the mission.
That’s it. Aside from its relationship with the ED, which we’ll discuss below, there’s nothing particularly complicated these benefits; they don’t require substantial training or sophistication. And for the most part, it seems likely that the vast majority of Boards do at least a decent job proving them to their organizations.
While all Boards need to provide their nonprofits with these primary benefits, other contributions of the Board are grounded in what the organization needs and what the Board is able to provide.
Ancillary benefits are those provided to the nonprofit when Board capacity coincides with organizational needs. Generally, ancillary benefits are of highest value in areas where staff capacity is weakest and of lowest value where staff is strong. A Board with expertise in communications, for example, has far less to offer a nonprofit with a talented internal communications team than to one without such a team. The bigger the gaps in staff capacity, the more potential there is for the Board to provide supplemental benefits.
Significantly, ancillary benefits are not provided by the Board as a whole, but by individual members. Taking that one step further, these don’t actually need to be provided by Board members at all. Though we associate an array of ancillary benefits with the Board—fundraising, strategy, financial acumen, etc.—that connection is not essential. Nonprofits often struggle when they treat Board development as the essential path to acquiring ancillary benefits rather than just one of several options. Often, other volunteers or paid professionals will be a better route to take.
Minimize costs. The net value calculation balances the benefits provided by the Board against the costs of supporting the Board. Meetings, recruitment and engagement efforts cost financial and other resources, especially senior staff time and energy—resources that could otherwise be utilized more directly to accomplishing mission.
Tellingly, it can be exceedingly difficult to draw a direct line between costs incurred by the nonprofit and benefits received from the Board. Primary benefits, by their nature, require very little of the rest of the organization, and since ancillary benefits are provided by individuals—not the whole Board—costs associated with the Board as a whole don’t necessarily correlate.
A Board seeking to maximize its value:
Limits its engagement with senior management, often filtering this through a Board Chair to minimize disruption;
Avoids Board-induced fire drills;
Covers financial costs associated with its own meetings and engagement (Boards that raise a lot of money have the best claim to the costs they incur); and
Encourages staff to only provide Board materials that are also useful for other management purposes. For example, financial reports to the Board can be a subset of those used for internal financial management.
Simply put, the fewer resources a Board appropriates, the more these resources are available to be put to use on behalf of the mission.
What does the nonprofit need? What can only the Board provide? Keep costs down. It’s pretty simple. Except when it comes to the relationship of the Board and ED. Only the Board can manage the ED, but how can it do so in a way that provides the most value to the nonprofit?
Managing the ED
The Board/ED relationship is often complicated by personalities, communication styles, egos and organizational politics. But a major challenge is simply structural: the relationship has two distinct components—(a) the ED is a direct report to the Board, so the Board is the ED’s manager and (b) the Board and ED have joint responsibility for the leadership of the nonprofit.
Reconciling these two components starts with recognizing that these are elements of every management relationship between a supervisor and a senior level staff person. An ED of even a midsize nonprofit, for example, may have Finance, Development, IT and other direct reports who are far more experienced and sophisticated in their areas of expertise than the ED. The only real differences are that Boards are committees and that Boards often fail to see themselves as engaging in management, to the point of obscuring this role by calling it “governance.”
Effective management of a competent ED demands neither extensive skills nor long hours. It does require an appreciation of the basics of managing any high level employee:
Building a relationship based on mutual loyalty, respect and trust.
Supporting the success of the ED. Every employee deserves a manager deeply committed to their growth and achievement. Even an ED!
Balancing accountability and learning. Leaning too far towards accountability incentivizes caution and can stunt both personal and organizational growth. Leaning too far into learning can elevate process over results.
Facilitating effective managing-up. High level staff members often know better than their managers what they need to be successful. This is particularly the case in the Board/ED relationship, where the Board has limited visibility into the organization.
Again, the quirk of the Board/ED management relationship is that the Board is a committee. To overcome this structural challenge, the role of managing the ED is often delegated to the Board Chair or a small Executive Committee. Although many nonprofits already do this, they often view it as a negative rather than as an indispensable element of managing the ED.
Co-Leading the Organization.
Ironically, Boards often provide the most value in leading and managing their nonprofits when they keep their engagement to a minimum—delegating management responsibility, aligning expectations with the ED, and refraining from the temptation to make decisions.
Delegation. While all Boards delegate at least some responsibility for management to the ED, they will often retain control of the big picture stuff—strategy and policies. EDs are then tasked with implementation, procedures and “day-to-day” management. But these are arbitrary distinctions and promote pointless line drawing, resulting in delays, dysfunctions and frustration. By fully delegating decision-making to the ED, Boards strengthen organizational clarity and efficiency.
Alignment. The prerequisite to effective delegation is a shared set of expectations for how the delegated responsibility will be used. Boards and EDs establish these expectations when they agree on goals and plans—budgets, annual goals, strategic plans. Of course, circumstances change—opportunities arise and plans go south—so expectations need to be adjusted. This requires trust, good communication and may well involve some conflict. But focusing on establishing and maintaining alignment encourages both EDs and Boards to prioritize the quality of the decisions over the far less helpful issue of who is supposed to make them.
Decision-making. As discussed in Five Myths. . . , whether or not Boards are made up of smart, well-informed members a group they will rarely be effective decision-makers. Clear delegation and a focus on alignment reset expectations away from Board decision-making. Boards can further avoid stepping into decision-making by:
Bringing only staff recommendations to a vote.
Requiring a majority vote to oppose a staff recommendation.
Asking staff to incorporate Board input into proposals rather than having Board members come up with alternative themselves.
Identifying in the agenda questions to be voted with an eye towards minimizing such votes.
Just because the Board should avoid making its own decisions, doesn’t mean it can’t contribute value to the process:
Consistent efforts at alignment refine ideas and priorities.
Boards can engender accountability, remind staff of shared priorities, and elevate learning.
Asking good questions about risks, consequences, opportunities, etc. is invaluable. Decisions benefit from being examined and challenged in a critical and supportive environment.
To the extent that the Board has more or different experiences than the ED, this constitutes information and perspectives that can be incorporated into stronger staff decision-making.
Ultimately, though, Boards should be modest about how much value they actually have to provide in managing the organization. And so they should be particularly mindful of the costs they impose on the organization.
High energy, highly engaged Boards undoubtedly bring extraordinary value to some nonprofits. The point here is less about limiting Board engagement than it is a call to calibrate the Board’s work. If we want better Boards—Boards that better serve their nonprofits and their missions—we have to accept that there’s likely to be as wide a range of answers as there are different nonprofits.