Strategic Board Governance

For NAPSEC Organizations and

Schools

Regulatory agencies are becoming more focused of the governance of non profits

Regulatory agencies have raised their expectations for the fiduciary conduct of board members

The press and constituents are voicing concerns

The Importance of Good Governance for Publicly Funded Non-profits

There is no Committee on Trustees or Nominating Committee

There is a Nominating Committee but it is inactive so current members invite their friends to join

Risk of the board becoming “an old boys” club

Characteristics of the “Inbred” versus the Strategic Board

Too rapid turnover of the board chair and board members creates a loss of institutional memory and often board instability

Too little turnover creates complacency and the perception of insufficient board oversight

Board members are involved in daily operations

Board members cross boundaries Chairs who stay on TOO long

Characteristics of the Poorly Functioning Board

Boards that are between 9 to 18 members Boards that have enough outsiders Boards with stability Boards with an appropriate relationship with a

founder or long-term leader Boards that manage change well Boards that have at least one CEO of a publicly

held company Most important: wise and well-trained board

members

Qualities of a Strategic Board

Three to five is too small to allow for discussion, a committee structure and regular meetings

A board that is too small tends to become too “cozy” and lax

Over 20 can become too unwieldy and the “real” power can become concentrated within a small subset of the board

The Optimal Size of a Strategic Board

Reflects the expertise and perspectives needed to achieve the mission

Several members with clout, power, influence and wisdom

Has members who attend regularly and participate fully

The Optimal Composition of a Strategic Board

Understand that their focus is primarily mission definition, clarity and support

Select, support, nurture and reward the Executive Director until a decision is made to terminate him/her.

Are knowledgeable about fiscal issues and provide oversight but do not micromanage operations, personnel or programs

Strategic Boards

Have deep board governance experience and knowledge of the principles of good practice

Undergo new board member orientation and regular board governance training and know it is necessary annually

Strategic Boards

Review, maintain and update by-laws consistent with the mission

Actively involve all members of the Board in subcommittees

Discipline board members who are “out of line”

Strategic Boards

Provide for the annual written evaluation of the Executive Director by the full Board

Provide for annual evaluation of the board chair and of individual board members

Limit terms of office within reason

Strategic Boards

Have members who understand that when they learn of an issue, they have the obligation to bring it to the Board Chair or Executive Director and must not deal with the situation individually

Understand that each member must be knowledgeable about the budget and cannot rely just on the finance committee

Strategic Boards

Respect board decisions and board confidentiality

Guard against conflicts of interest, whether business or personal related

Understand that authority is invested in the board as a whole

Understand how to engage in thematic “generative” discussions

Strategic Boards

Separate the interests of the organization from the specific needs of a particular person or constituency

Have the obligation to support the organization and its Executive Director and demonstrate that in the community

Strategic Boards

Choose board members to ensure balance, wisdom and a wide array of skills sets including strategic vision

Evaluate the executive director annually Conduct a professional review of the

executive director’s contract Manage effectively: manner, pace and

content of board meetings

Recommendations on How to Build Strategic Board

Have a Committee on Trustees (Governance or Nominating) that cultivates, screens, invites, trains, evaluates and if necessary, disciplines and removes board members

Board members should have rolling three-year terms with no limits BUT this assumes annual evaluation of board members

Build a Strategic Board II

Conduct regular meetings (about 8-9 annually)

Conduct regular subcommittee meetings: Finance, Governance/nominating, Advancement, Strategic planning, CEO support

Require each board member to sign a conflict of interest statement

Build a Strategic Board III

These leaders want to leave a legacy They need appropriate board oversight but

may be wary of it as well Board members (especially parent or past

parents) feel indebted and loyal to these leaders

Relationship with the Founder/Long-term Leader

The most dangerous transition is a new executive director

The second is a new board chair The third is the loss of key trustees Boards who mismanage these changes put

the institution at risk Search and succession planning along with

healthy transitions define a wise board

Managing Transitions

Evaluate the executive director’s performance annually and document the result to a file

Form a compensation committee Review the contract every three year’s

preferably with the assistance of an objective professional to ensure that the total compensation package will pass safe harbor’s muster

Balance transparency with confidentiality

Arm’s Length Management of the Director’s Contract

The head support committee of the board should oversee director compensation/contract renewal and evaluation

There should be a goal setting process discussed with the director and this committee

The board as a whole should approve these goals, limited in number to 5 or less

Evaluate the Executive Director

Every board member should undertake an end of year evaluation of the director against the agreed upon goals.

The director should write a self evaluation against goals.

The head support committee should, with the director, discuss the summation of these evaluations.

The chair should write up a final summary for the file and report on this to the June session of the board.

Evaluate the Director II

Strategic boards minimize the internal and external risks to the institution and providefor smooth leadership transitions essential to the health of the organization

Conclusion

Strategic boards avoid constant threats and crises and focus instead on long term vision/mission issues and on ensuring a financially sustainable model of operations

Conclusion Part II

John C. Littleford1-800-69-TEACH

John@JLittleford.comwww.JLittleford.com

Confidential: Intellectual Property of Littleford & Associates

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