things - first nonprofit foundation · ten things series for nonprofit boards welcome to this...

by Jan Berry with Gary J. Stern

EVERYBOARD MEMBER

NEEDSTO KNOW

THINGS10

Strong Partners:

Building AnExcellent WorkingRelationshipBetween theNonprofit Boardand Its ChiefExecutive

1 South Wacker Drive, #2380Chicago, Illinois 60606800.526.4352Fax: 312.930.0375www.firstnonprofit.org

Revised March, 2010

Edited by Vincent Hyman

MissionOur mission is to foster effective risk management practicesand the overall development and advancement of nonprofits

through unique, creative initiatives.

Ten Things Series for Nonprofit BoardsWelcome to this series of short briefing papers for nonprofit

board members. Whether a seasoned leader or first-timetrustee, there is a continual need to revisit the expectationsand demands of the critical board member roles in steering,supporting and safeguarding nonprofit organizations. In this

series, First Nonprofit Foundation has identified topics ofparticular interest to board members and will provide digestsof time-tested wisdom, emerging thought, and the insights ofhighly experienced practitioners. We trust these papers will

succeed in helping nonprofits to develop and advance. As always, we welcome your comments and suggestions.

MissionOur mission is to foster effective risk management practicesand the overall development and advancement of nonprofits

through unique, creative initiatives.

Ten Things Series for Nonprofit BoardsWelcome to this series of short briefing papers for nonprofit

board members. Whether a seasoned leader or first-timetrustee, there is a continual need to revisit the expectationsand demands of the critical board member roles in steering,supporting and safeguarding nonprofit organizations. In this

series, First Nonprofit Foundation has identified topics ofparticular interest to board members and will provide digestsof time-tested wisdom, emerging thought, and the insights ofhighly experienced practitioners. We trust these papers will

succeed in helping nonprofits to develop and advance. As always, we welcome your comments and suggestions.

Organizational success in the nonprofit arena requires an engaged andaccountable board, sound strategic direction and “real time” organizationalagility – all of which hinges on a balanced cooperative partnershipbetween the nonprofit board of directors and the organization’s chiefexecutive. Nonprofit organizations blessed with effective boards and chiefexecutives who work well together focus attention on creating andsustaining excellent relationships. While the following ten elements willneed to be customized to each nonprofit’s unique structure and culture,they can guide boards and their chief executives in actively developing astrong partnership:

The history of nonprofit board and chief executive relationships hasevolved considerably. Originally, in the United States, nonprofits wereexclusively voluntary organizations and all power accrued to the board. Asa nonprofit grew, the voluntary leadership might appoint an individual toadminister the organization. Often that person’s title was “secretary,” whichwas common into the 1950s. Even in large nonprofit institutions, boardmembers tended to be greatly involved in the range of day-to-day affairs.

As nonprofits continued to grow in sophistication and size, responsibilitiesand powers gradually shifted to the chief executive and “best practices”management concepts from for-profit counterparts were introduced.

"The unique and multifaceted relationship between theboard and its executive is perhaps the most important

relationship leading to organizational success or failure.Like the two partners in a skating competition, each side

can either bring out the best in the other or preventthe other from skating well.” 1

Jan Masaoka

11. Fulfill the Board’s Core Duties2. Hire Wisely and Anticipate Succession 3. Be Clear About Roles4. Commit to Building a Strong Relationship5. Be Clear About the Chief Executive’s Mandate 6. Jointly Determine What to Include in Regular

Board Reports7. Jointly Determine the Preferred Communications Formats8. Evaluate the Chief Executive’s Performance Regularly9. Focus on Governance as Leadership

10. Learn Together

Governance, both for-profit and nonprofit, recently has the attention ofthe public. As legislative and regulatory frameworks evolve, boardsmust be vigilant about understanding and carrying out their definedresponsibilities. To set a high standard of credibility and trustworthinessin its relationship with the chief executive, a nonprofit board should bewell-informed and well-organized, regularly assess its ownperformance, and hold its members accountable for the fulfillment oftheir commitments.

Principles of nonprofit corporation law prescribe three traditional boardmember duties: Care in decision-making, loyalty to the best interests ofthe organization, and obedience with regard to the nonprofit’s mission,values, and goals. In terms of building an excellent workingrelationship with its chief executive:

• Duty of Care translates into a board-approved chief executive job description, an excellent hiring process, clearly agreed uponannual goals, competitive compensation4, and a mutually develop-ed performance review process that is carried out annually.

• Duty of Loyalty requires that the board have and respect aconflict-of-interest policy and define and honor accepted lines of authority and communication between the board, executivedirector, volunteers and staff.

• Duty of Obedience means that the board – even after vigorousdebate over mission, goals, strategies or policy positions –unanimously supports governance decisions outside the boardroom and backs the chief executive in carrying them out.

A sound working relationship between the board and its chiefexecutive starts with the board paying attention to its own core dutiesand discharging them well. Beyond the essential basics, ideas andunderstandings about good governance are constantly evolving. Tohelp ensure excellence on their side of the board and chief executiveequation, board members should work with their chief executive tostay apprised of relevant laws and regulations, examine stimulatingmodels and, when needed, gain expert assistance.

Board members now have ready access to a wealth of commentary viathe Internet and a nonprofit press that is teeming with books, articles

1. Fulfill the Board’s Core Duties

Fulfill the Board’s Core Duties1.

The new expectation was for a level of management and leadershipexpertise necessary to meet the complexities of running a modern daynonprofit “business.” In the 1980s, John Carver addressed evolvingnonprofit leadership dynamics with The Carver Model of PolicyGovernance. 2“The Carver Model” suggested a strict separation of thepowers between the board and executive director based oncomprehensive board policymaking and monitoring of executivedirector performance. Today, the generally accepted rule of thumb isthat boards are primarily to “govern and support” and chief executivesare primarily to “manage”, a starting point for a nonprofit to furtherdefine roles and negotiate the right balance of authority.

In his 2004 book, The Not for Profit CEO, 3Author Walter P. Pidgeon Jr.,describes what most nonprofit boards and executive directors nowstrive for: a balanced cooperative partnership. “The relationship of theCEO with the volunteer leadership has been transformed into apartnership relationship. The leadership, both volunteer andprofessional, of successful nonprofits understands the administrativebalance needed to get things done… the bonds are much morecooperative.” Every nonprofit board has the ultimate authority to hireand fire its chief executive. Beyond this commonality, eachorganization’s history, context and players are unique. “Balanced andcooperative” means that boards and chief executives must continuallywork together to clarify their roles, set and meet mutual expectations,and practice the fine points of bringing out the best in the other. Withfocused attention, the partnership model offers the potential to releasethe energy, talent and passion of all of the organization’s leadership.

Among smaller nonprofits, many board members continue to supply thevolunteer labor force that keeps the nonprofit running. Current counselis for such nonprofits to teach their board members to wear two hats.One of those hats is as a board member, and when they wear that hat,the executive is their employee. However, when the board member isvolunteering to carry out some aspect of the work of the nonprofit, heor she should follow the direction of the person who supervises thatwork. Learning to wear two hats takes some practice, but when otherboard members set the tone for this, it can be accomplished. Thismodel is still evolving, and little has been written about it to date.

Governance, both for-profit and nonprofit, recently has the attention ofthe public. As legislative and regulatory frameworks evolve, boardsmust be vigilant about understanding and carrying out their definedresponsibilities. To set a high standard of credibility and trustworthinessin its relationship with the chief executive, a nonprofit board should bewell-informed and well-organized, regularly assess its ownperformance, and hold its members accountable for the fulfillment oftheir commitments.

Principles of nonprofit corporation law prescribe three traditional boardmember duties: Care in decision-making, loyalty to the best interests ofthe organization, and obedience with regard to the nonprofit’s mission,values, and goals. In terms of building an excellent workingrelationship with its chief executive:

• Duty of Care translates into a board-approved chief executive job description, an excellent hiring process, clearly agreed uponannual goals, competitive compensation4, and a mutually develop-ed performance review process that is carried out annually.

• Duty of Loyalty requires that the board have and respect aconflict-of-interest policy and define and honor accepted lines of authority and communication between the board, executivedirector, volunteers and staff.

• Duty of Obedience means that the board – even after vigorousdebate over mission, goals, strategies or policy positions –unanimously supports governance decisions outside the boardroom and backs the chief executive in carrying them out.

A sound working relationship between the board and its chiefexecutive starts with the board paying attention to its own core dutiesand discharging them well. Beyond the essential basics, ideas andunderstandings about good governance are constantly evolving. Tohelp ensure excellence on their side of the board and chief executiveequation, board members should work with their chief executive tostay apprised of relevant laws and regulations, examine stimulatingmodels and, when needed, gain expert assistance.

Board members now have ready access to a wealth of commentary viathe Internet and a nonprofit press that is teeming with books, articles

1. Fulfill the Board’s Core Duties

Fulfill the Board’s Core Duties1.

The new expectation was for a level of management and leadershipexpertise necessary to meet the complexities of running a modern daynonprofit “business.” In the 1980s, John Carver addressed evolvingnonprofit leadership dynamics with The Carver Model of PolicyGovernance. 2“The Carver Model” suggested a strict separation of thepowers between the board and executive director based oncomprehensive board policymaking and monitoring of executivedirector performance. Today, the generally accepted rule of thumb isthat boards are primarily to “govern and support” and chief executivesare primarily to “manage”, a starting point for a nonprofit to furtherdefine roles and negotiate the right balance of authority.

In his 2004 book, The Not for Profit CEO, 3Author Walter P. Pidgeon Jr.,describes what most nonprofit boards and executive directors nowstrive for: a balanced cooperative partnership. “The relationship of theCEO with the volunteer leadership has been transformed into apartnership relationship. The leadership, both volunteer andprofessional, of successful nonprofits understands the administrativebalance needed to get things done… the bonds are much morecooperative.” Every nonprofit board has the ultimate authority to hireand fire its chief executive. Beyond this commonality, eachorganization’s history, context and players are unique. “Balanced andcooperative” means that boards and chief executives must continuallywork together to clarify their roles, set and meet mutual expectations,and practice the fine points of bringing out the best in the other. Withfocused attention, the partnership model offers the potential to releasethe energy, talent and passion of all of the organization’s leadership.

Among smaller nonprofits, many board members continue to supply thevolunteer labor force that keeps the nonprofit running. Current counselis for such nonprofits to teach their board members to wear two hats.One of those hats is as a board member, and when they wear that hat,the executive is their employee. However, when the board member isvolunteering to carry out some aspect of the work of the nonprofit, heor she should follow the direction of the person who supervises thatwork. Learning to wear two hats takes some practice, but when otherboard members set the tone for this, it can be accomplished. Thismodel is still evolving, and little has been written about it to date.

In their paper, Hiring a Director for a Nonprofit Agency, Jenne andHenderson provide further insight into the decision-making process,excellent sample forms for candidate evaluation, and a clear set ofsteps for the board to determine organizational needs, develop a profileof the ideal executive director candidate, and plan and carry out therecruitment, screening, and selection process.

Once a new chief executive is on board, there is bound to be some“culture change.” Some destabilization is always the result of theintroduction of new leadership into an organization and more than oneexecutive succession has failed – even when change was the officialmandate – because not enough attention was given to what thetransition really meant. The culture of an organization, like the cultureof a people, is host to subtle assumptions, beliefs and values that gounspoken. When a new executive comes to an organization – evenfrom within - they often have experiences confronting ingrainedpatterns of “how things are done” that are surprising and, at times,distressing. Talking about the dynamics of change immediatelycontributes to a healthy board and chief executive relationship and canavert dangerous dynamics of secrecy and misunderstanding. Forging acooperative partnership from the start means the board must welcomediscussion and new insights about the assumptions, beliefs and valuesof the organization.

The First Nonprofit Foundation Booklet, Sustaining Great Leadership: Succession Planning for Nonprofit Organizations by Tom Adamsprovides excellent detail on the board’s role in this process.

2. Hire Wisely and Anticipate Succession

and reports on nearly every possible aspect of board service.Additionally, workshops and conferences are offered in manycommunities and skilled volunteer and professional nonprofitgovernance consultants are available to help educate and assist boardsacross North America and around the world.

Hire Wisely and Anticipate Succession2.

Of all the decisions that a nonprofit board makes, choosing a new chiefexecutive may be most critical. In some cases, a chief executiveposition is being newly created and represents a major developmentalstep which calls on the board to carefully consider a whole new set ofdynamics. Other boards deal with the departure of a charismaticfounder or successful long-time executive and must develop new clarityregarding the organization’s vision and future leadership needs. Allboards that currently employ a chief executive are encouraged todevelop succession plans. Such planning encompasses a range of issuesfrom who will lead day-to-day operations should a chief executive betemporarily incapacitated to initiating sensitive conversations with achief executive who is nearing retirement.5

Ideally, succession and hiring are orderly and positive streams ofevents. However, as Kurt J. Jenne and Margaret Henderson of theUniversity of North Carolina Institute of Government point out, “Thetransition to a new director may come when the agency is in turmoil.The transition itself may cause anxiety among board members and staff.The emotions generated by the transition may distract people,especially if the transition is abrupt, for whatever reason. During thetransition, the board may feel pressure from staff, clients, or otherstakeholders in the community to act quickly or to place undueemphasis on one or another interest or agenda. Therefore it isimportant throughout the hiring process to balance immediate andlong-range needs, personal and institutional agendas, and political andobjective standards of evaluation.”6

In their paper, Hiring a Director for a Nonprofit Agency, Jenne andHenderson provide further insight into the decision-making process,excellent sample forms for candidate evaluation, and a clear set ofsteps for the board to determine organizational needs, develop a profileof the ideal executive director candidate, and plan and carry out therecruitment, screening, and selection process.

Once a new chief executive is on board, there is bound to be some“culture change.” Some destabilization is always the result of theintroduction of new leadership into an organization and more than oneexecutive succession has failed – even when change was the officialmandate – because not enough attention was given to what thetransition really meant. The culture of an organization, like the cultureof a people, is host to subtle assumptions, beliefs and values that gounspoken. When a new executive comes to an organization – evenfrom within - they often have experiences confronting ingrainedpatterns of “how things are done” that are surprising and, at times,distressing. Talking about the dynamics of change immediatelycontributes to a healthy board and chief executive relationship and canavert dangerous dynamics of secrecy and misunderstanding. Forging acooperative partnership from the start means the board must welcomediscussion and new insights about the assumptions, beliefs and valuesof the organization.

The First Nonprofit Foundation Booklet, Sustaining Great Leadership: Succession Planning for Nonprofit Organizations by Tom Adamsprovides excellent detail on the board’s role in this process.

and reports on nearly every possible aspect of board service.Additionally, workshops and conferences are offered in manycommunities and skilled volunteer and professional nonprofitgovernance consultants are available to help educate and assist boardsacross North America and around the world.

Hire Wisely and Anticipate Succession2.

Of all the decisions that a nonprofit board makes, choosing a new chiefexecutive may be most critical. In some cases, a chief executiveposition is being newly created and represents a major developmentalstep which calls on the board to carefully consider a whole new set ofdynamics. Other boards deal with the departure of a charismaticfounder or successful long-time executive and must develop new clarityregarding the organization’s vision and future leadership needs. Allboards that currently employ a chief executive are encouraged todevelop succession plans. Such planning encompasses a range of issuesfrom who will lead day-to-day operations should a chief executive betemporarily incapacitated to initiating sensitive conversations with achief executive who is nearing retirement.5

Ideally, succession and hiring are orderly and positive streams ofevents. However, as Kurt J. Jenne and Margaret Henderson of theUniversity of North Carolina Institute of Government point out, “Thetransition to a new director may come when the agency is in turmoil.The transition itself may cause anxiety among board members and staff.The emotions generated by the transition may distract people,especially if the transition is abrupt, for whatever reason. During thetransition, the board may feel pressure from staff, clients, or otherstakeholders in the community to act quickly or to place undueemphasis on one or another interest or agenda. Therefore it isimportant throughout the hiring process to balance immediate andlong-range needs, personal and institutional agendas, and political andobjective standards of evaluation.”6

In the CompassPoint Model of Board Governance and Support, JanMasaoka illuminates “two fundamental types of nonprofit boardresponsibility – governance and support - each of which has distinctivecharacteristics.”7 When discharging its core duties, including successionplanning and hiring the chief executive, the full board, acting as theformal representative of the public, is governing the organization’saffairs. Masaoka explains, “In its governing role, the board represents theinterests of the community. It asks: is this organization using public andprivate resources to benefit the community and the public? In a sense,the board stands in the community, looking through the door into theorganization. It represents the community and speaks to the organizationin the community’s voice.” In its governing role, the board as a wholeprovides direction to the chief executive through policy-making, strategicplanning, monitoring of results, and formal votes on issues andquestions that rise to the level of governance decision-making.

As individuals, board members not only participate in governanceduties and decision-making but generally take on invaluable roles thathelp support the organization - through participation on committeesand task forces, by personally advising and coaching the chiefexecutive or other staff members, and by volunteering to do everythingfrom pro-bono legal work, to arranging a meeting with the Mayor, tochairing capital campaigns. “In its support roles,” Masaoka continues,“the board also represents the organization’s interests to thecommunity. In this sense, the board stands in the organization facingout and speaks to the community in the organization’s voice.”

Masaoka goes on to point out that much of the confusion about boardresponsibilities is confusion between what the board should do as agroup and what individual board members should do. The confusionmagnifies and can lead to troubled waters in the board/chief executiverelationship when individual board members are perceived to beexercising governance authority. Board members do and shouldprovide counsel to the chief executive and other staff, especially insensitive situations. However, because of the inherent power differential– the board, after all is “the boss” – it is incumbent on individual boardmembers, including the board president, to be cognizant andcompetent about “role switching” between governance and support.

Should a strong difference of opinion arise between individual boardmembers and a chief executive on an important matter, board membersalways have recourse to bring their point of view to the full board’sattention for governance consideration. For their part, chief executivesshould always welcome board members’ thoughtful advice, probingquestions, and offers to make promising community connections.However, unless there has been a specific governance decision toempower a committee or individual board member in a specificoversight role, the chief executive is not obligated to accept workdirection from individual board members - and it is very much up toboard members to respect and support this boundary.

As Cyril Houle points out in Governing Boards8, “Nobody outside aboard can ever fully understand its complexities and its involvementswith its executive and staff. Inherent in its very nature are severalseeming contradictions; delicate balances must constantly be achieved ifit is to succeed.”

3. Be Clear About Roles 3. Be Clear About Roles

Be Clear About Roles3.

In the CompassPoint Model of Board Governance and Support, JanMasaoka illuminates “two fundamental types of nonprofit boardresponsibility – governance and support - each of which has distinctivecharacteristics.”7 When discharging its core duties, including successionplanning and hiring the chief executive, the full board, acting as theformal representative of the public, is governing the organization’saffairs. Masaoka explains, “In its governing role, the board represents theinterests of the community. It asks: is this organization using public andprivate resources to benefit the community and the public? In a sense,the board stands in the community, looking through the door into theorganization. It represents the community and speaks to the organizationin the community’s voice.” In its governing role, the board as a wholeprovides direction to the chief executive through policy-making, strategicplanning, monitoring of results, and formal votes on issues andquestions that rise to the level of governance decision-making.

As individuals, board members not only participate in governanceduties and decision-making but generally take on invaluable roles thathelp support the organization - through participation on committeesand task forces, by personally advising and coaching the chiefexecutive or other staff members, and by volunteering to do everythingfrom pro-bono legal work, to arranging a meeting with the Mayor, tochairing capital campaigns. “In its support roles,” Masaoka continues,“the board also represents the organization’s interests to thecommunity. In this sense, the board stands in the organization facingout and speaks to the community in the organization’s voice.”

Masaoka goes on to point out that much of the confusion about boardresponsibilities is confusion between what the board should do as agroup and what individual board members should do. The confusionmagnifies and can lead to troubled waters in the board/chief executiverelationship when individual board members are perceived to beexercising governance authority. Board members do and shouldprovide counsel to the chief executive and other staff, especially insensitive situations. However, because of the inherent power differential– the board, after all is “the boss” – it is incumbent on individual boardmembers, including the board president, to be cognizant andcompetent about “role switching” between governance and support.

Should a strong difference of opinion arise between individual boardmembers and a chief executive on an important matter, board membersalways have recourse to bring their point of view to the full board’sattention for governance consideration. For their part, chief executivesshould always welcome board members’ thoughtful advice, probingquestions, and offers to make promising community connections.However, unless there has been a specific governance decision toempower a committee or individual board member in a specificoversight role, the chief executive is not obligated to accept workdirection from individual board members - and it is very much up toboard members to respect and support this boundary.

As Cyril Houle points out in Governing Boards8, “Nobody outside aboard can ever fully understand its complexities and its involvementswith its executive and staff. Inherent in its very nature are severalseeming contradictions; delicate balances must constantly be achieved ifit is to succeed.”

3. Be Clear About Roles 3. Be Clear About Roles

Be Clear About Roles3.

This is indeed a two way street. Board members and the chief executivemust display mutual respect for the unique contribution each brings tothe joint endeavor. They each must listen closely for and value thediversity of perspectives that are the strength of voluntary communityorganizations. They each must promote an environment that rewardsfrankness and truth telling. Leaders with the courage to talk aboutmisgivings and mistakes – as well as vision and goals - set the tone forthe environment. Their mutual commitment to open and honestcommunication is a cornerstone in building a strong relationship.

Trust develops over time when leadership puts values into action.Boards and their chief executives should create intentional structuresand practices that foster relationship excellence. Examples include:

• Well-designed annual board and staff retreats, in some cases with an outside facilitator.

• Bi-monthly board and staff “learning conversations” on criticalissues or trends in the nonprofit’s field.

• Frequent one-to-one meetings between the chief executiveand the board president.

• One-to-one meetings at least annually between the chief executive and each individual board member.

• Planned and spontaneous ways to recognize and celebrate one another’s contributions and accomplishments.

Making the commitment and creating time and space allows people toget to know one another and for relationships to deepen. In the ideal,board members and chief executives come to regard one another astrusted colleagues. When in conversation, each should remember tolisten closely, suspend judgment, ask questions and attempt to trulyreflect on the other person’s point of view. Chief executives must alsoremember that board members are “our most valuable volunteers”9 andapply the principles of volunteer management that lead to satisfyingrelationships. Board members should recognize that nonprofit chiefexecutives spend a significant percentage of their time on board mattersand strive to make every interaction productive. Given that even strongrelationships sometimes go through periods of stress, boards and theirchief executives are also advised to have policies and structures inplace should a serious grievance or conflict arise between them.

4. Commit to Building a Strong Relationship 5. Be Clear About the Chief Executive’s Mandate

Commit to Building a Strong Relationship4.

One of the key ways a board and its chief executive can strike thedelicate balances for effective organizational action is through cleardefinition of the chief executive’s mandate. The mandate for anonprofit executive has two dimensions: accountability and authority.The executive is accountable for mission-based results, financialperformance, and healthy organization development. The chiefexecutive’s authority consists of the range of powers and scope ofdecision-making he or she may exercise on behalf of the organization.

In order to be clear about the chief executive’s accountability, theorganization should have a well-articulated strategic direction that isunderstood and supported by the board.10 When the board, chiefexecutive, volunteers, and staff assess a nonprofit organization’senvironment and determine the organization’s vision, highest priorities,and financial prospects in concert, the outcome is coherence of focusand common understanding of desired results. A good planningprocess in itself serves to strengthen the board/chief executiverelationship. It also sets the stage for the board and chief executive tobe clear not only about his or her accountability in taking theorganization where it wants to go, but the board’s as well.

Well-thought out policies that govern the chief executive’s authorityshould be crafted in the areas of finance, contracts and purchasing,human resource management, risk management, collaborations andpartnerships, public policy advocacy, and in other areas specific to anonprofit’s field or particular context. Today, abundant explanations,examples, and digital templates covering virtually every aspect ofgovernance policy are available. A “nonprofit board policy” keywordsearch on the Web quickly reveals many resources.

In both of its dimensions, a chief executive’s mandate evolves overtime. The marching orders for a new executive will likely be moreshort-term and circumscribed than those of a seasoned leader. Newendeavors may dictate departures from the norm. For example, thechief executive of a community art museum is likely to have substantialauthority for negotiating exhibition contracts and making many highlevel programmatic decisions. However, the same chief executive maybe required to initially obtain “sign off” from a board committee on

Be Clear About the Chief Executive’s Mandate5.