A New Decade of Board Leadership for Tax Exempt Organizations - 2010

What is Most Important

Much has been written about the responsibilities of boards of directors leading tax exempt organizations.  Some offer that not-for-profit organizations should be led by “working boards” intent on providing support to the organization through a committee structure where funds are raised, strategy is set and operations are managed through strong board member leadership.  Others offer that not-for-profit organizations deserve boards of directors that focus in three major areas, setting and monitoring strategy, managing risk and managing leadership development.

These two somewhat disparate views of board responsibilities will continue to be debated.  As principals of the Board of Directors Development Group, however, we form a bias around tax exempt boards having responsibilities for four major functions in improving the success of tax exempt organizations.

First, board members must think strategically in order to confirm a strategic plan that innovates, systematically challenges the organization and collaboratively defines the future.

Second, board members are responsible for asking pertinent questions that create a risk management plan that is monitored by the board. Tools employed in enterprise risk management should be used by tax exempt board members to ferret out and address large risk challenges.

Third, board members are responsible for managing executive leadership of the organization. This responsibility goes beyond finding talent for the senior most leadership role. It includes insuring that development and succession plans are in place to assure continual leadership of the organization.

Fourth, board members are responsible for raising growth capital for the organization and, in a good number of instances, raising operating capital.

How to Execute on What is Most Important

Some consultancies advise that each function of the board of directors should consume a percentage of the board’s agenda.  For example, some say a not-for-profit board should devote eighty percent of their time to raising funds and twenty percent of their time to managing operations and setting strategy.  That may be a fair assessment for some boards; however, we conclude after years of advising tax exempt organizations that the board should set up expectations prior to creating an agenda that dictates the amount of time spent on each of the four functions mentioned above.

Board membership means each board member is expected to uphold and demonstrate standards.  Once adopted, these twelve standards form success profiles which are then used in the selection, development and evaluation of board members. 

Twelve Standards of Expectations

1. Strategic thinking – Board members focus all decisions on approved strategy and  they anticipate future needs and problems by analyzing the impact of current decisions on the future state of the organization
2. Think systematically – Board members understand the pieces of the organization system as a whole and appreciate the consequences of actions on parts of the system thereby possessing a big picture view of the situation
3. Focus on the Big Picture – Board members demonstrate broad knowledge and perspective by piecing together seemingly unrelated data points to identify patterns, trends and to see the bigger picture – this requires the Board member to thoroughly understand the nature and peculiars of the business of the organization
4. Demonstrate Vision and Strategic Leadership – Board members demonstrate the ability to create and articulate a clear, sensible and compelling picture of the future
5. Lead through Vision – Board members use the organization’s vision as a reference point and help others see linkages between the vision, organizational values, systems and processes
6. Change Leadership – Board members are visibly engaged in and can effectively engage the hearts and minds of everyone to change 
7. Influence Movement  - Board members seek clarity through rational and persuasive arguments while encouraging movement toward a common vision
8. Influence Ability – Board members gain support and commitment from others while promoting ideas persuasively and energetically
9. Build Trusting Relationships and Dealing with Ambiguity – Board members develop others’ confidence through consistent action, values and communication and are able to change gears in response to unpredictable and changing events
10. Inspires Action – Board members convey the opportunities of the future state in a way that motivates board members and business partners into action
11. Leads Change and Innovation – Board members encourage innovation and creativity while championing both change and continuous learning
12. Learning and Development Passion – Board members are relentless and versatile learners and teachers – they understand the business of the organization and are willing to share their expertise in accelerating success of the business

Seven Important Board Guidelines

Boards of directors function best with clear operational guidelines.  As principals of the Board of Directors Development Group, we identify seven board guidelines that, when present, promote success:

1. There is a clear board orientation program with resource materials that document the expectations and role of a board member.
2. Board committee membership is exclusive to board members with staff functioning only as advisors.
3. A separate and well executed evaluation process is managed by the board for the senior leader and for the board members.
4. There is a sense of urgency and a high level of responsibility demonstrated by the leadership of the board.
5. Board member responsibilities are monitored with actions taken for consequences of irresponsibility.
6. Board members maintain their role as strategists, risk overseers, leadership developers and fund managers at all times.
7. The alignment of fund raising responsibilities are very clear, including whether legal board roles include fund raising or whether fund raising is the function of an entity other than the legal board.

How to Identify What Success Looks Like

We are constantly monitoring our client board’s progress at successfully leading their organizations.  The following description of a successful board comes from a review of both the literature and our own experiences with clients:

• The board is responsible to ensure that organizations’ goals are clear and the budget is the right size relative to the organizations’ resources to grow over time.
• The board revisits the organizations’ strategies and policies from time to time to assure they’re appropriate for current economic realities. 
• The board establishes a sound strategic master planning process as a critical responsibility. Everything in the strategic plan is aligned with the vision of the organization.
• Board members recognize there will always be economic challenges and that the needs expressed in the strategic plan are just as real at any one point in time as they were when the plan was approved. The board continually solicits their constituents’ views to insure adherence to the strategic plan.
• Fund development is a tremendously important responsibility of boards of tax exempt organizations. The board must have a clear plan to meet operational and growth fund raising goals using either board members or a separate entity charged with raising funds. 
• The most distinguishing characteristic of a successful board is its exceptional capacity for continual professional development, self-renewal, regeneration and adherence to sustainability.
• Facilitating an annual retreat where the board covers a number of issues because it’s valuable for the trustees to get an opportunity to hear what each other thinks about a number of important issues. Meetings can be extremely informative especially by providing opportunities for critical thinking and decision-making.
• Even though a good number of boards in not-for-profit organizations are working boards, the first objective is always to provide outstanding strategic and visionary leadership to the organization.
• Very important is that board members focus on the strategic allocation of resources to make things happen, they seek to assure that the best governance processes are in place and that the most talented leadership is in place to oversee the day-to-day operations of the organization.
• Finally, one of the most important functions of a successful board is to get out of the way and let success happen.