Berkeley Board Fellows & Social Sector Solutions Professional Development Workshop
- 1. Board Member Workshop February 2, 2015 Haas School of Business UC Berkeley
- 2. Agenda 3:00 – 3:10 Welcome 3:10 – 3:30 Dynamic Board Lessons 3:30 – 3:45 LinkedIn For Good • Nonprofit Resources 3:45 – 4:00 Speed Networking 4:00 – 4:45 The Intersection of Finance & Strategy: Using Financial Data to Inform Strategic Decisions 4:45 – 5:00 Wrap Up 2
- 3. Boards and Directors have Legal Duties of Care, Loyalty and Obedience 3 Duty of care Duty of loyalty • An obligation to act in good faith – with best interests of nonprofit in mind – with such care of a reasonably prudent person • Be informed e.g. – Attend meetings regularly – Seek and review necessary information • Exercise independent judgment – Ask questions – avoid simply going along with other directors – Rely only on judgment of dependable sources • An obligation to keep confidences of nonprofit and avoid actions that benefit self at expense of nonprofit • Avoid self-dealing transactions • Where directors’ firm provides services or products to nonprofit, make conflict known to board, recuse self from discussions/votes Duty of obedience • Required directors to comply with applicable laws, adhere to bylaws and remain guardians of the mission • Understand mission and bylaws • Ensure regulatory filings completed • Require operation audit and policy review Hold public benefit corporation “in trust” for the community
- 4. Types of Boards Organizing Board – small, homogeneous, informal – committed to purpose – Very hands on to support start up Governing Board – larger and more diverse board – committees become important – shared authority between board and staff: board chair and executive director are principal leaders – transition to governing board takes at least 3 years and a lot of staff time Institutional Board – very large (35-60 or more) – prestigious -- includes large donors or those with access to funders – accepts significant responsibility for fundraising – often delegates some governance to executive committee 4
- 5. Creating a Dynamic Board • Monitor external and internal environment to prioritize areas for Board attention • Ensure quality performance across 3 primary Board roles • Develop a set of enabling practices around Board composition, size structure, processes, and staff relationships Monitor and improve performance Environment Enablers 5
- 6. 9 Responsibilities of Nonprofit Boards Monitor and improve performance • Select, evaluate and develop CEO • Ensure adequate financial resources • Lend expertise; provide access to people • Protect/enhance reputation of organization • Oversee financial management, ensure appropriate risk management • Monitor performance, ensure accountability • Improve board performance • Shape, clarify mission and vision • Engage actively in strategic decision making and policy decisions 6
- 7. The Governance Gap • 97% said that a high-performing board was important to a high-performing nonprofit... — However, only 19% said they were tapping their boards’ full potential • 94% felt that their boards provide the appropriate level of strategic guidance… — However, only 46% thought that their directors would be able to summarize both the mission and the vision of their organizations • 77% of respondents indicated a desire to improve board fundraising, but… — Just 21% set individual board member fundraising goals — Just 38% provided fundraising training — Moreover, a mere 16% reported having individual board members receive formal feedback on their performance at a regular interval • Source: McKinsey survey of social services organizations 7
- 8. Board Performance GPA 0 1 2 3 4 Fundraising Increasing diversity Community relations Strategic planning Monitoring performance Knowledge of programs Supporting CEO Legal/ethical oversight Financial oversight Understanding mission Director view CEO view Source: Boardsource Nonprofit Governance Index 2010 Survey response to “give your board a letter grade” on each dimension 8
- 9. 6 Enablers are Key to Closing Execution Gap 1. Working on the right things at the right time 2. Effective board leadership must drive for a true partnership at board and committee level 3. A trust-based relationship with CEO as an underlying foundation 4. Sweating the details on process is critical to board function and engagement 5. Composition requires needs-based management and a graceful transition mindset 6. Size and structure are a balancing act but must ensure coverage of 9 responsibilities 9
- 10. Self Assessment Is Critical Select, evaluate and develop CEO 1 Poor 2 Average 3 Good 4 Distinctive Succession planning Board has no clear succession plan Board has informal discussion with CEO on succession and on identifying candidates before need for a CEO transition arises Board has explicit view on succession and works with CEO to identify internal candidates with leadership potential Board has explicit view on succession and actively works with the CEO to identify internal candidates and provide development opportunities for the top 3-5 candidates to “round out” their skills Evaluation and development process Evaluations are subjective and occur on ad-hoc basis; most board members are unaware of process or feedback messages Evaluations performed annually against preagreed criteria; board members have opportunity to provide input to process Evaluations performed formally and annually against pre- negotiated goals; written feedback messages are reinforced through CEO compensation Evaluations performed at annually against predefined gooals; evaluation includes 360- degree feedback and includes a self-assessment by the CEO. Written feedback includes skill development plan. CEO compensation decision reinforces view of performance 10
- 11. Importance Ratings Vary Greatly by Organization Q: Over the next one to two years, how important is it for your Board to focus on: 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 Low HighMedium Rated Importance Group Average Group Response Range 1. Clarifying the organization’s mission or vision 2. Resolving key strategic or policy issues 3. Developing CEO capabilities 4. Developing financial resources to support strategy 5. Providing expertise or access to support organizational priorities 6. Building the reputation of the organization with key stakeholders 8. Assessing performance against mission and key program priorities 7. Overseeing financies and ensuring adequate risk management 9. Improving Board performance Ensure Leadership and Resources Monitor and Improve Performance Shape Mission and Strategic Direction 11
- 12. 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 0.8 0.9 1.0 1.1 1.2 Dynamic Boards Set Priorities Based on Need and Performance 12 Relative Performance (ratio vs average response) RelativePriority(ratiovsaverage) Change Maintain Quick fix only Reduce effort Ensure Resources Improve Board Performance Shape M/V Enhance reputation Monitor org performance Provide expertise and access Shape strategy Develop CEO Oversee financial performance
- 13. • Roles Matter: There are 9 clearly defined responsibilities of a nonprofit board, with a gold standard of performance for each. Increasing emphasis on: • Multi-year planning • Performance measurement and accountability • Risk management • Sweat the Enablers: Good governance is in the execution • Pay attention to the enablers of execution, including the small stuff • Board Chair as CGO • Understand and address the “human” aspects of director interests and styles • Pick Your Battles: There are lots of ways boards, as entities and directors as individuals, can help. Pick your spots carefully to allot valuable time where needed most • Look in the Mirror: Invest significant time in board evaluation and continuous improvement Summary Take-Aways 13
- 14. A Good Board is a Victory, Not a Gift Cyril Houle 14