CEO Boards/Working Boards?
Recently while I was working with a board, one of its directors commented: “This board used to be nothing but CEO’s. Now it’s the 2nd, 3rd, or 4th level managers. It’s better now. Then the board was just a figurehead board – now we are a working board.” He was proud of that observation.
This comment created an opportunity to consider what I have observed as a reality for many Alaska boards. People seem not to be aware that managing the day-to-day operations is not the board’s job. I am afraid that many people confuse what they should be doing with what they are comfortable doing.
I never heard the term “working board” until I moved to Alaska. The boards I was familiar with Outside we’re just boards – meaning governance boards. I get the concept of a working board. Board work is hard work, regardless if the board sees itself as a working or governance board. There are too many people that only want their name on the letterhead and are unwilling to roll up their sleeves to do the board’s real work. But the real work is not managing the daily operations.
In reality all boards are required to be governing boards – it’s the law. When boards go too far into operations, negative consequences occur. It is fair to say that I do not buy into the concept of a working board if that means a group of people that meet frequently enough to actually run the day-to-day operations. Most organizations start with a group of volunteers that can do that while also serving as a governing board. But when a well established, decades old organization continues to have a board fulfill that role, especially when they have taken the step of hiring a staff leader, they are likely not doing the board’s real job. Our sustainability model promotes the concept that a nonprofit without a staff is not sustainable. It also states that having a great board is another requirement. And once you have both a great board and competent staff, creating the balance and boundaries between each other’s functions builds the capacity for sustainability.
Unless the board is willing to meet too frequently for most busy people in today’s fast paced world, there is no way a board can truly manage a modern nonprofit. In order to succeed the board must hire a CEO that manages operations while it focuses on governance; which means setting the direction for and rules around the organization as well as securing and monitoring adequate resources so the mission is accomplished. The board should be monitoring activities, not managing, so it can fulfill its fiduciary responsibilities; which mean serving as trustees watching over the organization’s assets on behalf of its constituents.
I remember the days when there were many fewer boards. The number of charitable nonprofits is five times what it was when I started my career 30 years ago. Back in those days more boards were comprised of CEO’s, or senior professionals like attorneys or accountants (always the partners). With fewer nonprofits it was reasonable for at least the major nonprofits to find such leadership. With the explosion of the number of nonprofits over recent decades, there are not enough volunteers at that level to fill board seats. And in our culture we have become much less hierarchical in business and society, so having the “number one” person is not as important as it once was.
But with more people serving on boards who may be managers in their day job, there have been consequences. Managers are comfortable managing. Board members need to govern – to lead. As a result many nonprofits are perpetually dysfunctional because their boards are uncomfortable in the governance role. In order to succeed, those managers must become leaders, if they are not already, and delegate routine decisions to the staff. My observation is that too many boards are dominated by managers that only want to manage.
So how can you know if your board is dominated by managers? The answer is not as easy as looking at the number of CEO’s versus the number of people in middle management. I know many people from the 2nd, 3rd, 4th, and lower levels of management who are serving as very effective board members. So position alone is not a good indicator.
Jeff Foxworthy gave hints about how you can tell if you’re a redneck. Here are a few characteristics of boards that may be over-managed.
If the board meets more than once a month, it for sure is over-managed. As a matter of fact, most boards across the country now report an average of six meetings a year (BoardSource). If your organization is in crisis, then it may need to meet more often than not, but no board is sustainable in the 21st century if it is meeting more than once a month. Boards should meet enough to provide guidance for their CEO. But if they see their role as telling the CEO what to do on a regular basis, they will never succeed in today’s complex world. One board I met with a year ago had been in the habit of monthly meetings but took the risk to move to fewer, but longer meetings through the year. After a year of their experiment they are seeing increased engagement of board members. They are not alone. Meeting less frequently has other advantages. Whenever the board or one of its committees meets it takes tremendous staff effort. So if staff is preparing for board functions, it may not be as effective at implementing the mission. Having fewer meetings rejuvenated the staff of the nonprofit that opted for getting together less frequently. The point here is that boards need to debate and then justify when and how often they meet.
If the board requires the CEO to hire or fire a staff member, it is over-managing. While the board can approve new positions and salary ranges, the only employee the board should hire or fire is the CEO. While the board may have discussions with the CEO when they perceive a weakness in staffing, they will be on shaky ground when it comes to governing versus managing. Boards should only bring such issues up when there is a consensus. No individual member of the board should ever use his or her own perception as the reality when it comes to a staff member’s performance. If a member of the board thinks there is a weakness on staff, then before approaching the CEO about that staff member, they should check with other members of the board to see if their perception is the perception of others. I recently worked with a board where one member was consistently complaining to the E.D. about a particular staff member. When the entire board finally discussed that issue it was obvious that the rest of the board saw that staff member as an asset. The board’s most important job is hiring the right CEO – the second most important job is managing the relationship with that CEO. When a board allows one member to push an individual agenda, that relationship will be damaged. If the board, not just one or two members, thinks the CEO is not hiring the right people, then it needs to find a new CEO.
If the board expects to be involved in routine purchases needed for day-to-day operations, it is managing, not governing. Once a board approves a budget it should expect the CEO to manage the day-to-day operations within that budget. (By the way, a CEO should never make a big expenditure not included in the budget without the board’s approval.) Boards should monitor, not manage. That is what the law says. As long as a board approves a budget then monitors, it is doing its job. While no board should give its CEO a blank check, if it does not have a CEO that is trustworthy to follow through with the board’s approved budget, it has the wrong CEO. However, it is also a prudent board that understands not all CEOs should be trusted at an equal level. If the board knows the CEO has little financial acumen, then they should monitor more frequently. And for certain a board should monitor a new CEO more than it would a long-term CEO that has earned trust. A very well established nonprofit hired a new CEO and provided the same amount of monitoring that it had for its prior, long established and trusted CEO. That organization dissolved eighteen months after that new CEO started as a result of too little financial oversight.
If there is a constant turnover in the CEO job, the board, or one of its members, is likely over-managing. According to various studies, the number one reason most nonprofit CEO’s leave their job is a poor relationship with the board. This is most likely a result of a micro-managing board. An even more likely scenario is that one or two board members micro-manage and the rest of the board allows that behavior. I could easily give 30 examples of very competent people leaving their job because of poor board relations – most were the result of micro-managing members. In past articles I have even disclosed that in my own career, the only thing that has impacted me enough to quit a job was one or a few board members micro-managing and the rest of the board allowing that behavior to continue. This is a toxic phenomenon. It is too common. As we have tried to express, that is the reason it is getting harder and harder for most nonprofits to find the right CEO. While I am the first to suggest that a non-trustworthy, non-collaborative, incompetent CEO needs to go, when a nonprofit finds a collaborative, competent, trustworthy CEO they need to do all they can to keep that person. Every board should monitor this toxic behavior and manage their members that want to overly manage the organization.
When most boards had only senior leaders serving, there seemed to be less micro-managing. CEO’s and senior partners in professional firms are accustomed to monitoring. Many managers that are asked to monitor lack the skill or the trust in others to monitor. The problem that must be addressed is whether the board is governing or managing. The only things a board should manage are themselves and their relationship with the CEO.
That relationship should be a partnership where both partners speak with one voice and have respect and use for the other.