Article in Society / Leadership / Community
A discussion for the need for professional board governance and leadership training, board dysfunction, nonprofit abuses, merits of board governance training, nonprofit management, public administration, ethics, fiscal responsibility and transparency, and nonprofit management best practices
 
 
 

As a management consultant, having run and worked with several nonprofits as well as for-profits and having been on nonprofit boards and teaching Capstone and HR of public administration personnel at City University of New York Baruch College’s Department of Public Affairs program, I found the biggest challenge is trying to help board members who don’t want or don’t think they need to be helped. It’s a bit like working with people in denial and thus very problematic when trying to help others when needing to be fixed themselves. It is a bit like the blind leading the blind. I am lucky to be currently on a high performing board and committees that just came out of strategic planning process and board governance training that went with it. However, high performing boards, in my experience, are the exception rather than the rule. There is a lot of room for improvement as opinions on leadership differ. And nonprofits are no better than for-profit companies when it comes to fixing what is wrong, but are perhaps worse.

Board dysfunction is more the norm than the exception and often arises out of ignorance of board members about their roles and responsibilities. When I first started working with and on boards, there were as many management problems if not more so than with for-profits business. At least with for-profit managers, we tend to acknowledge problem egos and greed that get in the way with good business decision making as it happens so often. In nonprofit, board members are often in denial that they may be catering to personal agendas at the expense of the people they are supposed to be helping. As some tend to forget, nonprofit board membership, although nonprofit, is still a leadership public administration role. And as leaders as board members, even if not board chair or executive committee members, each board member carries the responsibility to check not only the executive manager of the nonprofit but also one another to be within guidelines of acceptable leadership and ethical conduct. This would include best management practices, financial transparency and transparency with regard to conflicts of interest. Your mission, should be the overarching principle by which you make effective board decisions. This is board governance.

HR and job descriptions look for ability to work with teams all the time but there does not seem to be a best practices rule book somewhere about Boards working in teams, aside from Robert’s rules, which is mainly to keep order when working in teams. There is little information on exactly how to be a good team member. "What exactly is meant by working in teams and how does one actually do that?" is a separate question altogether that requires an article or book in itself. Aside from board members, even in the everyday for-profit professional world, it seems that people need training on how to work in teams, and respect one another’s opinions even if they don’t agree. In normal professional life, often that respect is lost because of familiarity that leads to contempt which in turn leads to unprofessional behavior. This respect needs to be recovered through a process of team formation and norming by managers. In nonprofit, I’ve seen board members disrespect each other on committees, which is something they would never do at work on a committee at their job. Just because it is a nonprofit board does not mean that unprofessional behavior should be tolerated any more than on professional for-profit boards or any professional setting. From what I've seen, working in teams on committees should probably require training also so I think there is a service opportunity here.

Professional behavior should not be sacrificed because of the casual environment that comes from bonds and friendships among board members that have a common passion to help. In the end, despite the friendships, there is still money to be managed, people to be helped and outcomes that have to be measured and reported. Also important is how to manage the politics and keep their objectivity and the mission of the organization in mind as their role at all times at a strategic level. Teaching board members on how not to get swept up or play in the politics of cliques if needed, just like at work, is important. This type of management skill is also important to have in for-profit environment. Hence nonprofit management and governance is not that different from for-profit management and governance. And actually, there are more similarities than there are differences between nonprofit and for-profit organizations.

Many nonprofits still believe that since they are helping people in an altruistic role, that it is okay to be inefficient and ineffective with management and resources. In fact, strangely enough, some nonprofits believe that if they are losing money or in deficit, that must mean they are doing fantastically well as how much money they lose is an indication of how well they are helping people; it’s even considered a badge of honor. These misconceptions are so ingrained in people’s psyche, it does make it very difficult to make change for the better in the nonprofit world. Surprisingly, I once had a board chair tell me that the nonprofit’s goal was to spend all its money every year. This sounds unbelievably strange but if you understood the nonprofit world culture, there are many misconceptions about nonprofits within nonprofit. I have also heard this idea put forth in a book written by some private wealth managers from an investment bank putting themselves forth as expert nonprofit consultants to attract business managing and investing nonprofit reserve monies. As supposed nonprofit management experts, they were doing the nonprofit sector a huge disservice by propagating this terrible financial management idea and just because they wrote a book does not mean they are right. And believe it or not, it’s actually a good thing to be in surplus in a nonprofit, or a profit just like in a for-profit business, because that means you have a cushion for emergencies or special projects or economic downturns. Considering the board chair was from a financial institution, he really should have known better as a professional finance manager. What was more disturbing was that he did not agree even after board governance training. To make a long story short, there were additional complications with a personal agenda. With leaders and professional advisors like these, who needs enemies? Be discerning with who and what you choose to follow.

And there are strong board chairs and weak board chairs, so managing them is often not that easy. The line between the Board serving the nonprofit working with executive management and the Board overseeing the same executive nonprofit manager is often unclear in terms of who exactly is boss. In best practices executive managers are supposed to suggest and manage board member candidates alongside board members and yet still answer to them in terms of performance evaluations and salary negotiations. Then there are board members who believe that they can bypass the executive management and start meddling in the organizational operations. I’ve seen board members who treat executive staff and organizational staff as if they worked for them. As can be seen, this is a difficult balance and often there are politics that arise because of this misunderstanding in roles and responsibilities and power plays. I have also witnessed in nonprofits such as academic institutions, since unlike in business there is little money to fight over, more politics, egos and power plays. This confusion in roles and responsibilities can be further clarified and addressed with board governance training and sometimes with maybe with the help of a good third party objective consultant.

So I was not that surprised when I went to my first board governance training years ago, the trainer who was great, basically said that for some reason, nonprofit board members check their brains at the door of a board meeting because it’s work for a nonprofit. And this is more or less true from what I have seen. I have witnessed unprofessional behavior exhibited at board meetings, much like how we behave with friends and family because of that easy familiarity and common bond that is there that often leads to contempt for one another. Board members often cannot work in diverse teams, which surprisingly is often reflected at at work also. Most often I have seen board members misunderstanding their role as a strategic governing body and overstep into operations, which happens to be staff’s responsibility. Some people are not strategic nor and may not be able to provide appropriate oversight as board members. Not everyone is strategic and big picture oriented which is what board members need to be. More often than not, people as board members, lose their way for not being able to see the forest from the trees and should never have been serving in that capacity as board members. So not everyone should be invited to be on board and govern. However, people are often invited to serve on a nonprofit board because they are friends of another board member or have connections, without regard to any thought to particular skill set they can offer that is needed by the organization and board, aside from writing checks. I argue that some board members should even have their roles restricted to just giving lest they do more damage than good trying to do strategy as some people are more suited to follow than lead in certain areas. For some reason, for many, the idea of working with a nonprofit is license for subpar performance and expectations when it should be the opposite because the nonprofit is trying to help those in need with limited resources.

Here is just a brief description of board governance using the accepted acronyms on board expectations. Board members are expected to provide the 3 T’s: their time, talent and treasure (giving) or 3 W’s: their wisdom, work and wealth. From Boardsource.org, which is a great resource for nonprofit board training and training materials, “the other 3 Ds refers to the legal obligations of board members. They are the duty of care, duty of obedience, and duty of loyalty. These duties require that a good board member makes prudent decisions, respects laws and the organization's legal documents, and puts the interests of the organization above personal interests. The 3 Gs mean give, get, or get off.” A best practice is that all board members have to give something, so they have ownership or accountability or in for-profitspeak, "skin in the game", just like in a business, else they are just managing somebody else’s money. How better to do that than to give of their own personal monies? As we can see from the acronyms, board giving is a major responsibility and nongiving boards should be looked on with suspicion. You can tell much about the psychology of board and its attitude towards governance with how they approach giving and financial management of those monies.

Speaking about money, nonprofit management needs to understand financial statements and financial management as do their board members as part of their fiscal responsibility. Nonprofit or not-for-profit is only an IRS tax exempt designation, not a new way to manage nor a license to mismanage money just because charity is a more altruistic goal. Nonprofit means it does not distribute surplus funds to owners as profit but that surplus goes back into the nonprofit, just like a for-profit business reinvests profits in its business to grow. Another misconception is that nonprofit does not mean it’s ok to lose money. Nonprofits have income streams and must pay expenses and cover costs just like businesses do, but their income streams just come from slightly different sources. All their nonprofit tax returns, called 990’s, are public information. Nonprofits must manage financials wisely and resourcefully as do businesses. In fact, they must manage finances even more wisely and resourcefully than for-profit businesses because there is often less money to work with so they need to be even more creative and resourceful with management of resources (e.g. money, time, staff, etc) while still being impactful. I often half joke to my friends that managing nonprofits is more challenging than running a business and is actually more like running a startup because they have to do more with less. My argument is that if you can be more efficient and effective with managing the nonprofit, then you can help more people better.

Just a brief tutorial, a nonprofit is an IRS tax exempt entity. Board membership is considered as a public administration leadership role managing public funds and they are legally liable if there is mismanagement, which is why the Attorney General’s office in New York has jurisdiction over public charities and all nonprofit tax returns (990's) are available to the public for review. People did not realize the widespread abuses within nonprofit organizations until more recently when they have become more publicized. Remember years ago horror stories of the United Way executive who used funds to support his mistresses and excessive lifestyle? Boards are tasked with preventing these things in their governance. So how does one do that? Before Eliot Spitzer in New York resigned as Governor of New York under a cloud of mismanaging public funds for mistresses and as former Attorney General of New York State, he was cracking down on nonprofit financial abuses. This trend in scrutiny continues as the IRS in the past several years has changed the 990’s to more extensively probe nonprofit board governance, similar to Sarbanes Oxley activities. Good board governance training must touch on financial management, especially for those who are not strong in that area.

And funders and donors are very much of that financial mindset these days because they want to see measureable impact from the dollars they donate. This is understandable from the donor's perspective. If you give money to a charity, you would want to know that it is not going there to pay for frivolous expenditures such as taxis for the executive director to come to work as opposed to towards food, clothing and blankets for the poor. Donors are more savvy now with the financial statements so the nonprofit management culture must start changing to be more like business, which happens to be a bad word in nonprofit and tantamount to moving to the dark side. There is a love-hate relationship between nonprofits and business as nonprofits depend on businesses and people who work at them to donate money to them, but hate to have them tell them how to manage that money. So nonprofit staff are want their cake and eat it too. And some boards and managers of those nonprofits still have that mindset and that has to change. Donors can request to restrict their funds for specific uses as opposed to towards general operations as unrestricted funds in order to minimize abuses and ensure proper usage.

People who are invited to be board members of nonprofit organizations think that because it’s a charity and volunteer work, they don’t need special training. However, the opposite is true. To volunteer time to a nonprofit and be professional about it seems to be a difficult mix in most people’s heads but it is a real professional responsibility and there are legal repercussions if you are negligent. There are by-laws to follow and in New York, the state Attorney General’s office oversees nonprofits. So board members have to become familiar with local nonprofit law. Many board members don’t even realize there are separate laws for nonprofits. In New York, did you know there is a minimum number of members required on a committee? Being on a board does require special skills and training to not get caught up in managing the operations which executive managers and the staff runs.

Boards are dysfunctional like families to different degrees, and some times in that rare instance, it borders on white collar crime. Like businesses, diversity at the board level is important also as a best practice to prevent groupthink that can lead to abusive practices and breakdown of internal governance. The problem is that the culture of an organization, just like at a company, is set at the top, the board. The board culture, is top down, and will trickle down and infiltrate the entire organization. If board problems are not curtailed by Board Chairs, and sometimes I have seen it propagated by Board Chairs themselves, this will affect the entire organization, and not just at the board level. So whatever ills are happening at the board level will be reflected somehow in the organizational operations and ultimately affect the services being provided to those in need. People think no one has to teach you how to be a good family member or manager, but then we find all these self help books on how to be good parents, training courses on how to be a good manager, how to start a business, etc. So we know that we could all use continuing education and professional development training in just about everything we do in life. And we’ve all seen bad parenting, bad business owners, bad managers,bad teachers, etc. And all of these people often have had or sought training in some form. To be good at anything we do, we have to put our egos aside and admit we always have things to learn.Obviously training does not solve all our problems as we are still human and have personality flaws and don’t always do as we’re taught or told, but is better than nothing, and repetition is not a bad idea until one day the light bulb goes off and we finally "get it". To make matters worse, unfortunately, often when there is training offered, and often free, it’s not taken advantage of. So please take advantage of board training if it is offered near you as you should be so lucky it's convenient for you and not for others who wish they could avail themselves of it.

Board governance training is critical for a successful high performing board and I know that from experience. And training once is not enough as repetition helps reinforce the ideas taught. I usually recommend annual board governance training for all board members to get everyone on the same page every year and to reinforce important concepts that may be more problematic for some members. At a nominal $100-$200 per person per training, such as with United Way, for a minimum of 10 hours total for basic board governance best practices and leadership training, this is an affordable high value investment for board members in the future well being of a nonprofit and their own professional and even personal development. And many organizations offer free board governance training as well. New York State offers free nonprofit board governance training for nonprofits that work with some of their agencies. And board governance training is transferrable and portable to any nonprofit and even applicable to for-profit organizations. This training is invaluable. And if a board resists board governance training, which I have seen also, then one should be concerned about joining this board in any capacity. Similarly, nonprofit managers should also receive nonprofit management training with how to work with boards and it’s a good idea to also take board governance training also to understand where are the lines between staff and board roles and responsibilities. So there is really no reason to not avail oneself of board governance training if one is really serious about making a difference in the world by being on a board. So help yourself help others if you are on or going to be on a nonprofit board by committing to be the best board member you can be with board governance training. You will make a greater impact in the world and maybe save more people.

 
Dr. Pearl Chin, PhD, MBA Identity Verified

About the Author 

Dr. Pearl Chin, PhD, MBA
Business and nonprofit management consultant, business and social entrepreneur, nonprofit executive, strategist, change agent, innovator, ed

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