Governance Effectiveness Workshop

Sunday July 29th, 2012Yvonne D. Harrison, PhD

“IN THEORY, THERE IS NO DIFFERENCE BETWEEN THEORY AND PRACTICE; IN PRACTICE, THERE IS”

YOGI BERRA

“BOARD CHECK-UP”

HELPING NONPROFIT BOARDS BRIDGE THE GAP BETWEEN THE IDEAL AND REALITY IN THE GOVERANCE OF

NONPROFIT ORGANIZATIONS

Overview

• Gap between theory and reality in board effectiveness

• Paradoxes facing boards• Self-assessment tool to bridge them• Practicing self-assessment• Effectiveness of boards that have participated

in the research

In theory…

• The board represents the owners of the organization

• The board is the ultimate governing authority of the organization and is legally liable for its actions

• The board exercises duties of diligence, care and loyalty in the governance of the organization

• The board may delegate day-to-day management to a Chief Executive Officer however it remains responsible for setting the strategic direction and broad policies within which the CEO must manage

The reality of governance…

• It’s not always clear who the “owners” are • Boards often lack time and resources for closely monitoring

owners’ wishes• The views of stakeholders are not always uniform• Many board members lack expertise in the organization’s

“business” so find it difficult to establish strategic directions with confidence

• Due diligence too often tends to stop at finances• Too little time is actually spent on discussion of strategic

issues and assessing performance

Paradoxes facing Boards

• More information and tools are available on how to improve board performance (Murray, 2004; Lichenstein & Lutz, 2012)

• Many boards recognize the need to assess board performance (BoardSource, 2010).• Empirical research shows a link between the practice of self-evaluation and improved

performance (Herman and Renz, 2004).

YET

• Improving governance is one of the biggest challenges facing nonprofits (Murray, 2004; Bell et al, 2006)

• Many boards lack the time, financial resources, and technical expertise to conduct performance assessments (BoardSource, 2010; Holland, 1991)

• There is a lack of theory that explains why and how boards become effective (Harrison and Murray, 2011)

WHAT’S THE SOLUTION TO BRIDGE THESE PARADOXES?

Free Theory-Based Board Self-Assessment

Research and Development Tool

www.boardcheckup.com

Board Check-Up• Diagnostic

– Elements of the governance process– Factors that influence the governance process

• Method – Critical assessment process

• Information System– Self-assessment tools – Reports

• Governance Effectiveness Research Project– Descriptive—identifying the most challenging governance issues– Analytical—determining the significance of relationships between GE and OE – Theoretical—why do boards become ineffective? To what extent does the

practice of BSA increase GE? What is the impact of BSA on nonprofit boards and organizations?

Board Check-Up

BCU- IS

BSA

BIA

FU BSA

BIA

Board Self-Assessment (BSA):Outputs Information in Two Reports

Board Impact Assessment (BIA):Change in Governance Effectiveness

Board Check-Up Information System (BCU-IS)

Influences Governance Process Effectiveness

9. LeadershipCEO/

Board Chair

5. Structures& Processes

7. Composition and Development

8. Culture

Roles and Responsibilities:

1. Fiduciary 2. Planning 3. Performance

Assessment4. Fundraising

State of Board Effectiveness

Nonprofit Organization Effectiveness

WHATWHO and HOW WHY

CONCEPTUAL FRAMEWORK for RESEARCH PROJECT

6. Meetings

Method

• Examination is similar to a medical check-up– Symptoms. Understanding the issues that challenge

boards. Check-Up helps boards define issues clearly and confidentially.

– Diagnosis. Effort is made to understand the causes of issues through discussion and further examination.

– Treatment. Once the issue has been properly diagnosed, a treatment program to remedy the situation should begin.

Your Turn to Practice the Governance Self-Assessment Process

• Guidelines include statements of issues and a framework for assessing them in nine dimensions

• Turn to your neighbour to discuss issues that challenge your board’s effectiveness.

• Use the guidebook to frame your discussion: – Discuss the symptoms as you see them in your organization. – What are the causes (diagnosis)?– Report out on any treatment you will consider

introducing to your organization.

Large Group Discussion

– What were the Symptoms?• What are the issues? How significant are they in your

organization?– What was the Diagnosis?• Why do they exist/persist in your board and

organization (i.e. what are the causes)?– Any Treatment?• What strategies might resolve the issues? How would

you go about implementing them?

1. How effective are nonprofit boards?

www.boardcheckup.com

Three measures:

1. Computed BE Score (272 Max Score)—M =195.79, SD = 34.01

2. Levels of BE

3. Overall Perception of BE (4 point scale)

• Good (M = 3.0, SD = .71)

Board Effectiveness Total Scores

www.boardcheckup.com

2. What issues are the most problematic?

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2. What issues are the least problematic?

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2. What issues challenge boards the most/least?

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3. What is the relationship between board and organizational effectiveness?

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4. To what extent do perceptions of board effectiveness vary?

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4. To what extent do perceptions of board effectiveness vary?

www.boardcheckup.com

Summary

• The reality is that bridging governance paradoxes is difficult.

• Board Check-Up is a tool to increase board capacity to conduct reliable and valid self-assessments.

• To return value, boards need to use the tool and critically consider the information generated from it.

• Discussion should acknowledge strengths and spotlight challenges

• Consider best practices that match the situation.