Fear about the performance of nonprofit Boards or Committees is being fed by ignorance, misinformation, micro-management and lack of understanding.
Fear about Board/Committee performance needs to be managed, and the first step is to make sure that each Board/Committee member knows and understand the facts about their function, role and responsibilities:
- the function is to govern - not to manage,
- the role is focused on the entity’s strategic and policy framework, financial viability and compliance requirements – not on the day-to-day operational activities, and
- responsibilities focus on the actual performance, behaviour and accountability of the Board/Committee as the governing body, and of the individual women and men who comprise the Board/Committee – not on assumptions or perceptions.
This article summarizes nonprofit governance through the 1970s, 1980s and 1990s; government and other external policy challenges through the last decade; and presents current and future challenges for nonprofit governing bodies.
1. Governance is as governance does!
Governance is as governance does, regardless of the size, shape and purpose of the organisation. ‘Good Governance’ exists only where individual Board members understand the role and function and are sufficiently competent to fulfil the role and function.
‘Good Governance’ satisfies internal and external expectations and requirements, as well as ensuring a reasonable level of job satisfaction among individual Board members.
‘Good Governance’ ensures the best possible practices at governance, management and operational levels of activity in order to ensure the best possible outcomes for members and service-users.
- It is in the work practices of individual Board members and of the Board-as-a-whole where ‘Good Governance’ is to be found – not only in what they do and don’t do, but the manner in which things are done or not done.
2. Key policy movements affecting governance in the nonprofit sector
Through the 1970s, nonprofit organisations spent a lot of time writing funding submissions to attract funds from governments, foundations, trusts and corporations to support the purpose for which they had been established. Their submissions emphasized ‘inputs’, ie additional resources required to cater for the needs, interests or aspirations of their service-users or members. And the greater the need, the more chance there was of attracting funds.
Then, in the 1980s, the focus of submission-based funding moved from inputs to ‘outputs’. This emphasized the new or improved services or programs for which funding was being sought.
In the 1990s, the focus moved from ‘outputs’ to ‘outcomes’ – and to measurable outcomes. By way of explanation, an ‘output’ is what the organisation creates through application of its resources: an ‘outcome’ is the impact or effect of outputs on the life or lifestyle of the service-user. For the funder, the measurable outcomes indicate the return on investment of their funds.
Governing bodies had moved from justifying inputs, through designing and sustaining outputs, to being accountable for achieving measurable ‘consumer’ outcomes.
- By the 1990s, nonprofit organisations were providers of contracted services rather than groups of like-minded people offering services or welfare to people with a need, interest or aspiration.
3. The new century has brought further policy movements:
- Legislative frameworks for service standards, accreditation or registration have become highly sophisticated: the internal work involved in achieving accreditation or registration is intensive, taking staff time and attention away from the design and delivery of services.
- The process of tendering (note that all tendering is competitive, and that the submission process is closely aligned with tendering) has either forced or encouraged nonprofit organisations to form strategic networks or partnerships, to merge, or to wind-up their legal entity and see their service included as a project within the organizational structure of a larger or more viable organisation.
- Government departments have reduced their staff levels; separated the functions of central and regional staff; and revised their internal procedures and processes associated with negotiating, managing and monitoring agency agreements.
- There are now the nonprofit equivalents of the major categories within the commercial sector: MNEs (multi-national enterprises), Large Business (employing 100+ people), SMEs (Small and Medium Enterprises, employing between 6 and 100 people) and micro-businesses (employing between 1 and 5 people).
- Joined-up government and whole-of-government agreements and arrangements became the norm with the new Century – leading into the ‘one-stop-shop’ model of service delivery through regional and local alliances and partnerships among service providers.
- The process of introducing reforms to the disbursement, monitoring, reporting and acquittal of major Commonwealth and State program funds is continuing and expanding. The focus of reform tends to be the legal and organisational structure of individual nonprofit organisations as much – or more than – the critical challenge of meeting increasing demand for services with decreasing resource levels.
- There is an increasing expectation bordering on requirement that nonprofit organisations will become innovative and entrepreneurial, willing and able to accept and manage the associated risks, in order to fulfil the priorities and policies of the funding source.
- The ongoing imbalance of training and support in favour of CEOs, senior managers and staff places individual board members at a disadvantage. This imbalance has the potential to increase the risks associated with enforced internal change, imposed external change, conflict within and between individual organisations – and most importantly, the level of job satisfaction of voluntary board and committee members!
4. Immediate and future challenges for Boards and their CEOs
4.1 To monitor the behaviours of the people who are members of the governing body
In order to fulfil their roles and responsibilities, individual members need:
a) a detailed understanding of their legal, moral and ethical role, duties, responsibilities and obligations,
b) a sound and dependable knowledge and information base from which to draw conclusions and make decisions,
c) a body of staff who are loyal to the organisation and committed to its purpose,
d) a positive sense of job satisfaction in their own voluntary roles, and
e) genuine acknowledgement of their effort and achievements.
Boards vary greatly in the way in which they work together, as much as in the quality of decisions they make. Some make considered decisions after strong consultation, keeping their organisation well informed and interested. The other extreme is the acceptance of knee-jerk responses from a vocal minority group within a rather apathetic membership.
Human dynamics in the nonprofit sector are more intense and unpredictable than those in the commercial sector, and mainly for one reason – that the ‘bottom line’ is seen to be intangible. Intensity and uncertainty are common factors where the bottom line is intangible, for it is the bottom line that is the measure underlying the setting of priorities, distribution of scarce resources for the design and development of projects and services, and assessment of outputs and outcomes.
Language can contribute to this factor of intangibility. For instance, the purpose of an organisation may be expressed as to achieve social justice outcomes, enhance individual self-esteem, or encourage integration of people of various cultures and abilities.
A wise governing body will insist that such an intangible purpose is expressed in terms of organisational outputs designed to create or contribute to a measurable benefits in the life or lifestyle of service-users. The above language is reminiscent of the 1970s, but can still be found in some needs-based organisations today.
- Concepts such as accountability, business practices and continuous quality improvement are still in the process of being manifested as Board work practices, and it is the challenge and primary responsibility of individual Boards to see that this is achieved and maintained.
4.2 To monitor the level of job satisfaction among Board members
Where objectives, outcomes or indicators are expressed in fuzzy or general terms, it is difficult to experience, recognise or measure progress, achievement or short-term results. In such an environment, job satisfaction for members of the governing body is difficult to design and even more difficult to achieve.
Job satisfaction can generally be defined as the balance between meeting -
- the needs of the individual, and
- the demands of the role in the organisation.
Men and women who accept membership of a nonprofit board do so in the spirit of community service. Their voluntary contribution of time, energy and experience is critical in the process of making quality programs and services available. Their individual need is to have their voluntary contribution acknowledged and respected. Their personal reward is to see positive and constructive results from their voluntary contribution in the lives of the people who use or access programs and services.
Job satisfaction for board members therefore requires a balance between recognition and performance… between being recognised for their voluntary effort and being able to perform the demands of their position on the Board.
- Board members need to monitor their own levels of job satisfaction as well as the level of job satisfaction of those under their employ, including their senior staff people.
4.3 To monitor the style of governance
The ‘style of governance’ is the manner in which the Board operates.
A pro‑active style of governing is committed to a healthy body (ie a healthy organisation), taking great care of the organisation, building trust and openness, and initiating a health care regime that ensures job satisfaction for all and significant benefits for service-users and the community.
- They are committed to maintaining a healthy body.
A re‑active style of governing is committed to ‘band‑aiding’. It recognises wounds (ie mistakes in its records, unwise decisions, faulty communication, unclear expectations of staff) after they are inflicted – or self‑inflicted; sometimes cleans the wound, and applies the band‑aid … then another as that one drops off! This governing body reacts to each problem or opportunity when it is no longer possible to ignore it. In short, they buy band‑aids in bulk, and have no planned health care regime.
- They desperately wish for a healthy body.
A crisis style of governing is into surgery! Every event is traumatic, affecting the whole body (organisation). Anaesthetic is applied for each crisis and the entire organisation becomes stagnant while each crisis is handled. The wound is opened up to reveal inept governance and lack of planning. Heavy bleeding occurs, causing loss of energy, activity and confidence, with body parts being repaired or removed (accompanied by project failures or resignations). Suturing is completed and, if the organisation is lucky, a healing process is allowed.
- They think that repeated surgery creates a healthy body.
Many Boards will be able to identify with one or more of these three styles of governing: and it is possible to be using each of the three at the same time! For instance, they could be pro-active in public relations, re-active in dealing with staff and resorting to crisis management in running their monthly meetings.
However, inconsistency in style breeds suspicion and lack of trust, and undermines confidence in the committee or board as a whole.
- A pro‑active board is able to be consistent. Members share a common vision for the organisation’s future and are realistic in their decisions on how best to achieve that vision. Such a board generates trust and confidence, and draws people into forward planning and initiatives toward achieving an agreed and achievable future.
This article by Jean Roberts was published in the VCOSS (Victorian Council of Social Service) ‘Just Policy Journal’, December 2008