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Lessons from Nonprofit Governance Practice

I want to draw attention to a paper of eight years ago which resembles Sonnenfeld’s paper in pointing out how boards themselves can improve their performance.

As I have said before, though there is an extensive literature on governance in the nonprofit arena, in discussions and reportage about governance much more prominence is given to forprofits. This can lead to the deceptive conclusion that nonprofits need to learn from the commercial world about how to run themselves in an effective manner; even that nonprofits, like government agencies, need to be more business like! However, a scroll through the pages of the Nonprofit Boards and Governance Review website will reveal that nonprofit boards can have very deep insights into effective governance. As Peter Drucker once said, forprofits have a lot to learn from nonprofits.

Near Tinonee, northern New South Wales (More)

That nonprofits, or at least nonprofit governance literature, can be a model for governance generally is shown by a landmark paper by Barbara Taylor (Academic Search Consultation Service), Richard Chait (Harvard University Graduate School of Education) and Thomas Holland (University of Georgia Graduate School of Social Work) in Harvard Business Review in 1996 [i]. They commence by observing that “Too often, the board of a nonprofit organization is little more than a collection of high-powered people engaged in low-level activities. But that can change, the authors say, if trustees are willing to discover and take on the new work of the board. When they perform the new work, a board’s members can significantly advance the institution’s mission and long-term welfare. Doing the new work requires a board to engage in new practices. First, the board must go beyond rubber-stamping management’s proposals and find out what issues really matter to the institution.”

Taylor and colleagues characterise this “new work” as requiring finding out what matters which means board and management together determining the issues and the agenda, making the CEO deal with big ideas, having the board understand who the important stakeholders are and developing relationships with them, consulting many sources of knowledge and information, board and management together deciding what should and can be measured and what can’t and needn’t be and above all organising around and acting on what matters and not on what doesn’t! They also observe that many boards are too prone to focus on others for resisting change when they themselves are no different. Correctly they assert that entrepreneurs and industrial captains are seldom effective because they are unused to working with others cooperatively. And they close by suggesting that a mentoring program which pairs new trustees with more experienced members can often help.

Every one of these suggestions and observations is of great importance. None of them can be achieved by legislation or by regulations promulgated by some outside body that supposes that it can exert power and influence from afar! These suggestions and other improvements will be achieved through leadership and cooperation between board and management.

[i] Taylor, Barbara E., Richard P. Chait &, Thomas P. Holland, “The New Work of the Nonprofit Board” Harvard Business Review Sep/Oct 1996, p 36