The growing stakes for good governance.
Like most association leaders, you're probably paying more attention to the role of the board of directors than ever before. A growing number of leaders are recognizing that if their organizations are to be fully accountable to their members and communities, capable of managing change, and faithful to their missions, their boards must be made up of knowledgeable and effective board members who understand their roles as stewards. Increasingly, these association leaders also recognize that the performance of the boards on which they serve may well determine whether accountability in the association world is achieved internally through improved self-regulation or whether it is more likely to be imposed externally, by default, through more rigorous governmental regulation.
Exposing the vulnerable underbelly
For years, association leaders have vociferously maintained that boards have a critical role to play in strengthening and shaping the future of the associations they govern. However, until recently, many association boards have been ignored, invisible, or marginalized by their proclivity to function like part-time administrators. This is changing as a result of at least three forces that are propelling association boards more prominently into the public eye.
First and perhaps foremost, the climate of the nonprofit world in which associations operate has changed from one of credibility and confidence to one of growing public scrutiny and increasing demands for accountability. In the past few years, the nonprofit community has faced a growing number of serious and well-publicized scandals, leadership crises, and attacks on certain tax-exempt organizations perceived to compensate their chief executives too generously. The weaknesses exposed in cases such as these have undermined the public's confidence in the nonprofit sector as a whole. While the overwhelming proportion of associations may be managed with integrity, these front-page stories have been a wake-up call alerting governing boards that they must adopt a leadership role in working more closely with their chief executives to provide the accountability, oversight, and ethical behavior that their stakeholders demand.
A second force raising the bar for board standards is the dramatic growth in the last few years of associations and other nonprofit organizations to a point where they now exert a significant force on the nation's economy. The nearly $1 trillion dollars in assets that have been amassed by the nonprofit sector are being eyed hungrily by the federal treasury and cash-strapped municipalities as a new source of revenue. As more associations have become major employers and property owners, many journalists and public officials have begun calling for a reexamination of tax-exempt privileges. As nonprofit organizations seek new streams of revenue and more entrepreneurial practices, complaints from business about unfair competition and concern about tax revenue "lost" to exempt institutions are being lodged with increasing frequency. This places pressure on association board members to be better advocates for their organizations by being able to articulate what their communities receive in return for these uncollected taxes.
Rapid advances in technology, changes in the way we communicate, and growing competition for dues-paying members and volunteers contribute to a third force: the extraordinary pace of change, which has resulted in a rising tide of expectations on association board members to act not only as stewards and advocates, but also as strategic thinkers. In a recent "Dilbert" comic strip, the character Dogbert humorously described the velocity of this pace when he exclaimed, "Information is gushing toward your brain like a firehose aimed at a teacup!" Increasingly, an association's ultimate survival will depend on its capacity "to anticipate the need for and to lead productive change" - a quality that Harvard Business school professor Rosabeth Moss Kanter ascribes to people and organizations she labels "change masters."
Closing the credibility gap
Associations that are successful in mastering change while sustaining accountability seldom do this without the support and participation of their boards. The following five questions are designed to help association board members and chief executives calibrate the degree to which their boards are active players in this process:
1. How much time does your association invest in helping board members strengthen their governance skills? In spite of the growing belief that a correlation exists between the effectiveness of an association and the performance of its board, a majority of association board members receive little, if any, orientation or continuing education to help them understand their responsibilities once they join a board. Associations often seek the best and the brightest as board members, but then unrealistically assume that these individuals automatically know what they are supposed to do once they join a board. Even those of us who have survived service on multiple boards come to recognize how much we need to learn about a particular association's strengths and needs, the role of its board, and the expectations of individual members when we join a new board. In short, it is foolish for association leaders to expect their boards to fulfill their responsibilities and to help shape an association's direction without a program of trustee education.
Sometimes the role of the board is described in terms of policy versus administration, where policy is presumably the realm of the board and administration is ostensibly the distinct province of the chief executive. In practice, real-life association governance offers many exceptions and contradictions. While it is important to define how governance is in fact different from management, it is also important to consider veteran board member Robert Lewis's admonition that whether or not a particular act on the board's part is deemed to be interference or oversight is often determinable only after the fact, with the wisdom of hindsight.
The National Center for Non-profit Boards (NCNB) has found that most board members who are guilty of micromanaging do so because their responsibilities, if not their overall role, are unclear. Fortunately, a growing number of association executives as well as board members are beginning to recognize that an investment in the orientation, continuing education, and engagement of board members is even more important than purchasing an adequate directors and officers liability policy.
2. What mechanisms do you have in place to sustain accountability at your association? Associations as tax-exempt nonprofit organizations will increasingly have to justify their existence by showing what has been accomplished and relating those accomplishments to the financial resources expended. Too many board members are unaware that the tax information Form 990 most associations file with the IRS is a public document. It includes key financial information, such as the compensation of the chief executive, which can be obtained by members, journalists, and others. Board members must also be aware of the true financial condition of their association and the possible ramifications of decisions they make on issues ranging from executive compensation to developing new sources of revenue.
Most of the abuses that have occurred in the nonprofit sector are not a result of dishonesty or corruption on the part of board members, but rather result from an inadequate understanding of the board's critical responsibilities. There is no system that can completely prevent fraud or mismanagement, but good internal controls will enhance accountability. These controls include
* segregating functional financial responsibilities, such as requesting checks for financial disbursements, approving these expenditures, and signing the checks;
* limiting check-writing authority;
* conducting independent audits; and
* providing accurate, timely, and intelligible financial reports to the board.
Requests directed to NCNB's Board Information Center suggest that a growing number of nonprofit leaders are implementing better safeguards for accountability, such as
* developing conflict-of-interest policies for board members and officers;
* conducting regular assessments of the performance of the board as well as of the chief executive;
* publishing annual reports that provide information on the association's activities and finances; and
* taking the time to orient board members about their fiduciary responsibilities and their legal liabilities.
3. How do you equip the board and the staff to monitor the association's performance and progress? In the for-profit world, board members generally look to earnings per share and return on equity as measures of success. As members and association donors demand greater evidence of outcomes of an association's performance and progress, they expect better ways to measure what results the association has achieved in fulfilling institutional goals, providing high-quality programs, meeting members' needs, and building fiscal stability.
A board that devotes most of its time to administration and operational issues does not have much time left to address the strategic issues that will have the greatest impact on the association's success. In looking at your agendas for the past three board meetings, do you find that the board is addressing what ultimately matters for your association? If not, it is never too late to stop and ask, "What issues should occupy the board's time and attention during the coming year?" and "How do we measure performance and success in these strategic areas?"
4. How do you engage your board in the strategic planning process? To make wise policy decisions for the future, the board must take the time to consider where the association is going and how it is going to get there. It is clear that associations are becoming more diligent and competent about strategic planning, but they are often unsure about how to engage their boards in a meaningful role in the process. Without such engagement, proud association staff members who hand their well-crafted plan over to their board to ratify are less likely to get either the benefit of the board's brainpower or the buy-in needed from that board to successfully implement the new plan.
One of the board's responsibilities is to ensure that the association engages in a multiyear planning process that looks beyond the present or the current year. A good planning process considers such questions as
* the adequacy of the mission statement;
* the changes in the external environment that have affected the association; and
* the ways that the association can meet new challenges.
5. How does your association respond to inquiries from the media? Unfortunately, much of the media coverage of the nonprofit sector in the past few years has come from investigative reporters, since few newspapers have a "nonprofit beat." The coverage often has focused on the "bad apples," but what are we doing as association leaders to educate and inform journalists who don't have a clue about what we do? Unfortunately, many of us are unresponsive when reporters do call with questions about a problem or an allegation - a position that merely heightens a reporter's sense of smell. If you don't talk to a reporter, your side will get short shrift. As a Business Week reporter recently asked, "Who do you expect to tell your story if you don't do it yourself?"
More importantly, a call from the press is an opportunity for association leaders to educate the public about their various roles in the association process. Associations must place a higher priority on developing media relations policies so that
* reporters' calls are returned within deadline;
* an association spokesperson is designated;
* individual board members are informed about a problem before they hear about it on the news; and
* journalists are given context and background for their stories.
Sealing the partnership
The growing concerns about accountability and the public's closer look at the way associations and other nonprofit organizations do business have profound implications for governing boards. Increasingly, those with an interest in the health and vibrancy and accountability of associations believe that a strong and committed board of directors is one of the hallmarks of a successful association. At their best, boards focus the mission of their associations, provide oversight and ensure accountability, and work in partnership with staff to build support for the mission. Chief volunteer leader and chief staff executive, in collaboration, are in a position to help boards achieve these goals.
* At least three forces of change have combined to expose associations to public scrutiny as never before.
* Board members must become strategic thinkers and "change masters" in order to support associations in sustaining accountability.
* Training the board in governance, financial, monitoring, and media skills can help associations achieve their missions.
Nancy Axelrod, president of the National Center for Nonprofit Boards, Washington, D.C., from 1987 through 1996, recently joined the national nonprofit practice of the management consulting and executive search firm A.T. Kearney, in Alexandria, Virginia. Axelrod is a member of the boards of Independent Sector and the Greater Washington Society of Association Executives Foundation. NCNB's e-mail address: firstname.lastname@example.org.
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|Date:||Jan 1, 1997|
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