Episode 78: Board Governance and Formal Positions

Welcome to another edition of "Around with Randall," your weekly podcast making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.

It's spring here and hopefully where you are but here with "Around with Randall" weather's warming up, time to look at the leaves coming out. And what does Randall Hallett think of governance, which is today's subject on "Around with Randall." I saw an article here recently from the Stanford Social Innovation review that made me just smile and it reminded me of spring cleaning and what you need to do to get ready for your year at your house, or in your yard, or wherever. And for your nonprofit, and I give them an immense amount of credit, the Stanford Social Innovation Review, because they spoke to a topic that I have thought about an awful lot but was never able to articulate the way they did. So I want to give them credit and then talk about what the article says about your board and a new way to look at things, and then some of my experiences in the tactical pieces.

So the title of the article written by Paul Jansen and Helen Hatch was, "Does Your Nonprofit Need a CGO?" And really, your board - a chief governance officer. Maybe close to a decade ago, maybe quite not quite that long, I joined the board at the Ronald McDonald house and I'd kind of taken this similar role that I'm going to describe here in a second on the board. But it was exponentially more important. There were some things happening in the first several meetings of my tenure where I just was kind of taken aback by what was the process, or lack thereof, in the board meetings and on top of that when I was being asked to sit on the board, which I consider it an honor, I asked for an interview with the executive director. I asked for certain documents and I wanted a conversation with the chair of the board, who was going to continue, and I said I just have lots of questions and they said well, no one ever asked that. And I thought another process issue. So when I got onto the board, about two meetings, and I began to speak my mind not much about the content because I didn't know enough yet but about the context and what the process that wasn't occurring, just basic board level things and that's really what I did for the next six years, unofficially, kind of became the chief governance officer for the board to the point where maybe more radically than anybody would really want, but I rewrote the bylaws, certainly approved by the board. We got rid of old committee systems, we changed the way we selected our board members, we, not only the kind of the selection criteria but the entire timeline and process. We hired a new executive director, which I was lucky enough and feel very blessed to have chaired, to like okay we're gonna do this process-wise.

And what I found in this article by Jansen and Hatch was kind of the world that I believe in. They just put it in writing and did a fabulous job of doing it. So what did this article say? Well it really highlighted what are the holes in governance. And then I'm going to take it kind of one step further about some of the practical applications that a governance leader can do on a board.

So number one is that most boardrooms don't understand basic good governance, and we'll get into some of those details. But whether it's self-evaluation or whether it's what should be on the agenda or how meetings should be run, what selection process we go through, most board members don't even think about that. Number two is that the article and the authors talk about that most the time we don't have the right voices in the room, and I totally agree with that, and we'll talk about a selection process and the tactical pieces that the real value of the board is the people in there and the diversity that they have, not only from what we see in terms of race or culture or religion or demographics, but more importantly their life story and what they bring to the board in terms of their perspective and their overall experiences.

The third is that we certainly, and I talk about this a lot, want and need boards to be driven to understand and be engaged in philanthropy, but that doesn't remove the legal implications or responsibilities a board member has. And what we find when you talk about surveys, board source does a tremendous job of this in terms of their reporting, we have a lot of board members that don't know their legal responsibilities. They don't understand the duties of care. They don't understand conflict of interest. And we have a responsibility to make sure those things are always first and foremost in what goes on even if they're great fundraising board members. There's still a legal component to what goes on inside that organization all the way up to improving your 990.

The the fourth is that there's very little what I would call assessing or a job evaluation, not of the staff or really the CEO. The, only board should only really have one employee but of themselves what does that look like. Sometimes it's uncomfortable. The fifth is is that based on a lack of strategic planning, boards will put less money, less support, less investment into critical issues, and that's where strategic planning comes in. It's interesting in that if you knew what the most important priorities were you're more likely to put more resources into them and what we find is that when there's a misalignment between strategic vision and daily operation we tend to put more money in daily operation, which leaves the strategic needs kind of floating out there a little bit.

The idea, number six, is the idea that there is a kind of an inconsistent effort - I'm trying to be nice about this amongst the board - by some board members they stop showing up because they don't understand what they're doing. What we know is if you have good governance there's more engagement, more investment by those board members, and as a result they're more likely to show up and do what you ask of them. Number seven is the kind of this understanding of the difference between board management and strategic board. Thought they're totally different. And lastly is that governance has gotten tougher, and I agree with the authors here one thousand percent things like financial complexities, technology, social cultural shifts, the idea of diversity and equity and inclusion have come up, and by the way critically important. They are a part of our conversation but they've ratcheted up the priority list, not very holistically, which is endemic of the fact that we probably have not paid a lot of attention to it. We also have evolving legal issues and we have increased public scrutiny so these are kind of the eight things that the authors talk about.

Maybe some of those things resonate with you and your nonprofit board. So what does this all mean in terms of a chief governance officer? Well, I think there's some tactical things that I would recommend, very specifically, if you could identify an individual to serve in this role or even better a small committee that can lead this conversation. So what are those differing various critical duty identified aspects of governance? The first and foremost is a defined process at least, in my opinion, you define process for board selection. All too often we get towards the end of the fiscal year whether that's June 30th or December 31st and a couple months out somebody says oh my gosh we've got new board members we're losing three we got to bring on three more. Who knows somebody? And it's their next door neighbor. Great board development, in terms of selection, is a year-long process. I've actually designed a a kind of a calendar mapping to say these are the things you need to be doing in each month of your year to be in the right process for board selection going forward. It's a year-long endeavor and that will allow for things like diversity, equity, and inclusion, and what i call holes in the community where is it we don't have connections. I actually use a social media map to best describe when I do board trainings where they can begin to figure out how we can get people in from those holes. I don't know if that's country clubs. I don't know if that's wine tasting groups. I don't know if that's yacht clubs. I don't know where is this, where are the social gatherings of your community, and then how do we overlay the needs of a diverse board with bringing in people from those places so we have connections in all parts of our culture, local culture. And sometimes it's just not very well thought of that takes a little time it takes a little thought but it's not overly complicated it's just not used very often. So the first was really driving the process for board selection.

Number two is kind of an A and a B, is meetings I believe that the governance officer, governance committee, really along with the chair of the board should be dominating the agendas in terms of their development, and that also includes the meeting process. So let me give you a couple of examples. I'm a big believer in what they call consent agendas, meaning we're going to give the board member a lot of information that doesn't need to be reviewed during the meeting. A couple of very practical examples. There's nothing worse than having to go through the minutes during the meeting. You couldn't read them beforehand, they couldn't be sent beforehand. I think we miss an opportunity to put more strategic conversation into a board when we take it up with a lot of meetings minutes. I'll give you another one. Finances. Now should there be a regular communication between a chief financial officer or a finance committee? Yes. But you don't need a 30-minute demonstration of the finances every single board meeting. Most of those things can be balance sheet, income statement, profit loss, or net revenue can all be sent ahead of time. And if there's something troubling, concerning, should be addressed in the meeting but if everything's running smoothly it becomes a report out in the consent agenda so you give more time for engagement. The other thing is meeting process is what goes on in the meeting and what activities are we actually looking for, and let me give you kind of a sub example. It's this understanding of what a board should do and what management should do. What's the board's job?Responsibility? What's management's job? Responsibility? At a very high level, and this is breached constantly and I'm lucky enough to give a lot of trainings for boards, sometimes I sit through them and I'm like this is not board-level conversation. Management's job is to run the organization and if it's really done effectively the board really only has one employee and that's the president, CEO, etc, whoever the top employee is and everybody else in the organization works for them. Well that means if you follow that edict that in terms of process and understanding the balance stream management. Board I was in a Ronald McDonald House board meeting and the executive director, the the head of the management, the staff came in did her report and announced that she was making some job changes and and all of a sudden a board member says, well I'd like to see those job descriptions, and one of them was an administrative assistant. And as kind of the unofficial chief governance officer I said no and looked right at the chair and I said we're not discussing the job description of an administrative assistant in a board meeting. Move on. That board member who wanted to talk about it wasn't happy and I had an, not an unpleasant, but an uncomfortable such a conversation to better explain what we did. We don't get in the way of the management job descriptions, and job hiring is their problem. Our job is to set a budget, make sure it stayed, that the executive is staying within that budget, and to prioritize strategic needs so they can align staff goals with those needs. But we don't talk about job descriptions. That's management, and meeting process in terms of not allowing what goes on day-to-day to come into the board meeting for decisions. I'm not saying you shouldn't have mission moments and the board shouldn't be very well educated on what goes on inside the organization but what i'm saying is there's a difference between knowing about it and acting on it, and the only real decision that a board makes is who is their CDO or CP, EO, who is that person that they hire. How do they review them? How do they compensate them? And then review the budget in terms of what they want to do that fits and aligns with the vision that the board sets out. So meeting process is about keeping things at a high level, strategic.

I mentioned just a second ago there's some tactical things that a governance committee can oversee. We oversaw the process of evaluating the CEO. We looked at it as a 360. We gathered the data, we put it together, we would bring it back and then have a conversation about what we viewed as, you know, basic evaluation of their job, their - by the way setting those goals at the beginning of the year was actually the first step in evaluating the CEO at the end of the year because if you establish great goals then they know what's expected. I also was very vested in the idea of self-evaluation and i looked at it kind of in three parts. Number one is would they evaluate themselves. Number two would they evaluate other board members, and number three would they evaluate the board as a whole? And I use surveying tools online to do this and would bring back the results and what became an illuminated issue was there were holes in what our board members thought we should be doing versus what we were doing, or that we didn't allow for certain things to happen, or they felt like the requirements to be on the board were too heavy or too light. It gave us a strategic opportunity for conversation. The other thing that a governance committee or chief governance officer can do is lead or push for appropriate strategic planning efforts. It doesn't mean they define the strategic plan, that's not their role. But their role is to say where are we in the strategic plan. Each meeting do we need a new strategic plan, and how do we develop a process to get to a strategic plan? So they get to monitor and advise on how to drive that.

There are a couple traits that i would recommend if you're looking for someone to kind of take up this mantle. Number one, they can't be afraid of conflict because there are going to be times where there's conversations either in the meetings or afterwards, say we don't do that. They also have to be someone from a trait perspective that aligns with this, with the chair of the board. I've mentioned all these tasks they're not the chair. The chair of the board runs the meeting but this person can help guide the chair on how to best run the meeting and keep subjects at the top of the list that are appropriate. Finally they have to be a great communicator. They have to be unafraid, as mentioned up front, but also not harsh. And sometimes conversations need to take place behind closed doors, but it's that communication, the non-accusatory part of the process that a great governance chair or governance officer can help the board with in terms of getting where it needs to be. One very small last technical thing. I found that a vice chair of the board is generally underused. The article says the same thing. I thought it was very much aligned with my own thoughts maybe it's the vice chair's job to be the governance regulator officer because they're going to run the organization of the board meetings. They knew the details. It might get them more ready. Sometimes that's the biggest challenge with a new chair. If they've not been engaged enough this would force engagement. So make sure that you're you're thinking about the traits along with the responsibilities, the selection process, the agendas, and process inside the meetings keeping things, management out, strategic in the board meetings. Having reviews of the CEO, having reviews of the board itself, all of these things are critically important to creating good governance and I give a lot of credit to the article. Again that's the Stanford Social Innovation Review. Does your nonprofit board need a CGO? Jensen and Hatch - where they are with the authors - really appreciate their work. This gives you something to think about as well.

Don't forget check out the blogs - posting them all the time. They're about 90 second reads, things going on in the industry, leadership, just things to maybe think about give you some insight for. And of course you can email me at podcast@hallettphilanthropy.com. If you have a thought on a different subject or just want to make a comment known, always willing to take those. Don't forget you're part of something important. Nonprofit work is becoming more and more and more rising through the ranks in terms of rankings in terms of importance in communities. Those with it have less holes. They have more service, particularly for those who need it, the most which brings me to the end and my favorite saying... don't forget some people make things happen, some people watch things happen, then there are those who wondered what happened, and at the end of the day we are people who make things happen for people who are wondering what happened and for the things in our community that are wondering what might happen.

Know that you have value. Know you're making a difference get up today, tomorrow and every day knowing you can be the difference-maker for a lot of important things, and really for people who are needing assistance. Appreciate your time. Thanks again for joining me right here on "Around with Randall." And don't forget, make it a great day.