The Benefits of Results-Based Governance for NFPs

This guest post is from Andrew Johnson, of Mawer Investment Management Ltd.

On the surface, an Institutional Portfolio Manager’s relationship with his or her clients may seem like a one-way street; yet in my experience, I am often the one who learns the most. I have come to appreciate the sometimes subtle, sometimes dramatic differences that can exist among not-for-profit organizations. One area that continues to intrigue me is how a board (or a committee) interacts with each other and with their “management team” (CEO or Executive Director), and what governance models seem to be the most effective.

My insight into the many variations of governance models comes from my regular attendance at board and committee meetings and from my regular contact with CEOs and Executive Directors on day-to-day matters. Because this topic interests me, I recently completed the NFP Governance Essentials Program offered by the Institute of Corporate Directors. This has helped complement my observational data with a more rounded out understanding of effective nonprofit board governance. These experiences, coupled with the fact that I work with many different organizations, have given me the perspective I feel I need to be able to stand back and compare the different types of governance models.

Of course, every organization is unique with its own characteristics and needs. There is no one-size-fits-all prescriptive model for governance, but the one that stands out the most favourably to me is the Results-Based approach. This model is essentially a hybrid of two popular forms of governance: the Traditional and Policy Governance models.

In the Traditional model, the board mainly provides oversight through committees (e.g., finance/investment, HR, fundraising), while the management of the foundation is led by a CEO or Executive Director. Having clearly defined roles in this model helps to avoid board member interference in the management of the foundation, which can sometimes result in conflicts with the CEO/ED regarding how best to execute the foundation’s vision.

On the other hand, a board working under the Policy Governance model establishes policies that address the goals of the foundation. Once these policies are established, the CEO or Executive Director has the freedom to determine the best way to adhere to them. This model is sometimes described as the board providing the “end” while the CEO/ED provides the “means.” Committees are seldom used under this model and, given the focus on clearly defined boundaries for the CEO/ED, there is rarely interference from the board in the management of the foundation.

The downside of the Traditional model is typically too much meddling from the board in CEO/ED responsibilities. The downside of the Policy Governance model is that it can put too much distance between the board and the management, weakening the board’s control and oversight capabilities.

The Results-Based board combines the previous models in a way that emphasizes the effective portions of both while mitigating the unproductive aspects. It focuses on setting a clear direction for the foundation, views the CEO/ED as an important collaborator with the board (essentially a non-voting member), acknowledges a legitimate board role in the management of the foundation (expertise and advice), and focuses the use of committees around board responsibilities (oversight and accountability) rather than management functions.

In general, the board sets the vision. The CEO/ED takes the lead in devising the plan to achieve that vision with the board playing an active role. Furthermore, the board focuses on auditing the results rather than policy compliance.

The intuitive logic behind this model is appealing. It provides the flexibility to allow the board to focus resources on critical issues in the short-term. Long-term, they can focus on results with clearly defined measures of success and timelines. Also significant, it allows board members to offer their expertise in certain management situations.

I think this last point is extremely important. While there are unfortunate exceptions, I don’t believe any serious director joins a board simply for the sake of attending a few meetings and padding their resume. Most are there to serve in a way that adds value to the organization and the stakeholders. The best way they can do this is to be enabled to offer their expertise. To this point, the Results-Based model creates a sense of belonging for board members. If board members realize they have the power to positively impact the organization they serve, they are more likely to commit to delivering high quality work—something that can be extremely contagious amongst a group of well-intentioned individuals.

Here’s the thing, nonprofits can survive even with a weak board or a flawed governance model. They are doing work that needs to be done, and there’s not much that will stand in their way. The nonprofits I work with are not content to simply survive. Their aim is to thrive. They know that a high performing board can enrich the management performance of the organization.

While there are many approaches to governance, the Results-Based model is a worthy consideration for those foundations seeking more effectiveness. Ultimately, it could mean the difference between surviving and thriving.

 

Sources:

  • “Governing for results: how boards can add value” by Mel Gill (Charity Village), July 10, 2006
  • “The new work of the nonprofit board” by Barbara E. Taylor, Richard P. Chait, and Thomas P. Holland (Harvard Business Review), September-October 1996 Issue
  • “Governance models: what’s right for your organization?” by Mel Gill (Synergy Associates Inc. abstract), 2001
  • Not-For-Profit Governance Essentials Program
    • Institute of Corporate Directors
    • University of Calgary, Haskayne School of Business
    • Rotman School of Management, University of Toronto

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