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✧ C H A P T E R 1
Got Good Governance?
All nonprofit boards have one thing in common. They do not work.
—Peter Drucker
Since you are looking at a book entitled Good Governance for
Nonprofits, chances are that you are a board member, a CEO, or
a staff member of a nonprofit organization. If so, you are in good
company. There are almost two million nonprofit organizations in
the United States, all of which have boards and most of which
have someone functioning as the CEO. Tens of thousands of these
nonprofits have sizable staffs.
While you may not agree totally with Peter Drucker’s rather
stark assessment of nonprofit boards, we suspect that you can
think of areas where your board could be more efficient and effective.
Here again, you would not be alone. There is no perfect
board. Members and officers of nonprofit boards, assisted by authors
and consultants, are training critical eyes on the structures
and processes of their boards and coming away with lists of areas
for improvement—in some cases rather long lists. The problem,
therefore, given the usually limited human and financial resources
of nonprofits, has become less a matter of what needs to be done
and more a question of how one attacks this to-do list in a systematic
way.
Four Organizations That Have Done It
Here are four nonprofit organizations whose boards were confronted
with a list of improvements in their governance model. In
Chapter 12, we have documented the course of action that each of
them took to address its list. For now, we will simply introduce
the four organizations and their situations.
Miriam’s Kitchen has served homeless men and women in
Washington, DC, for almost 25 years. Over the years, it has
survived on an ounce of cash and a ton of heart. After the turn
of the century, however, it stabilized its management and its
operations and found itself moving from a somewhat unsettled
adolescent organization to a more secure adult. Its board was
still populated by highly committed and dedicated directors,
but it needed a governance structure that would better serve
this now mature organization.
The Translational Genomics Research Institute (TGen) was a
high-risk gamble by an unusual blend of public and private
entities in Arizona, which together put down $120 million to
bring the biotech industry to the state. TGen was the ‘‘anchor
store’’ in what was expected to be one of the top biotech malls
in the world. The board that was formed to govern TGen included
some of the most powerful people in the state, starting
with the governor. From the beginning of this impressive organization,
its board needed a structure and a set of related processes
that would accommodate the diversity of its members
and the gravitas of so many heavy hitters.
The Association of Graduates (AOG) serves the United States
Military Academy at West Point and its unique column of
graduates known as the Long Gray Line. Although West Point
was established by President Jefferson in 1802, the AOG was
not formed until 1869. Its original purpose was to help bring
together graduates who had fought on opposing sides in the
Civil War. As the academy approached its bicentennial in
2002, therefore, the AOG was an old association—and its governance
structure showed it. In 2004, the chair of the AOG
board assembled a task force to identify ways for it to bring
its governance into the twenty-first century.
World Vision International is one of the largest and bestknown
charitable organizations in the world. For over 50
years,World Vision has faithfully served poor and hungry people
around the globe with an efficiency and effectiveness that
few organizations can match. In 1998, World Vision, Inc., the
U.S. partner of World Vision International, hired a CEO who
had little experience with nonprofits, but who knew the value
of good governance; with the support of his board chairman,
he sought help in upgrading the board’s structure and processes.
These organizations have very different missions that affect
the lives of very different constituencies. They are unlike in size,
age, complexity, and geographical reach. The profile of their
boards is also different, as are their bylaws. Yet for all of their
dissimilarities, these organizations share the common experience
of following a course of action that has led to marked improvement
in the way their boards govern their organizations. We call
that course of action a roadmap, and in this book we describe
what it is, why it so effective, and how any nonprofit board can
take advantage of it.
Who Needs a Roadmap to Good Governance?
Your organization may not match any of these nonprofits well.
You may be on the board of a large hospital, a small museum, or
a medium-sized boys and girls club. Your organization may have
a staff comprising several hundred paid professionals or a handful
of unpaid volunteers. You may be governing a mature organization
or one that is just starting up. Your reach may be the world or
simply your neighborhood. Your organization may be dedicated to
growth or content to serve at its existing level. Whatever the profile
of your organization, it deserves good governance—and the
roadmap can get you there.
‘‘What about ‘working boards’?’’ we are often asked. ‘‘Our
organization is a decent size, but we don’t have staff, and we rely
on the board members to conduct the programs, do the fundraising,
even keep the books. We aren’t a ‘governing board’ that
needs to worry about the role of the board, the role of the CEO
(which we don’t have), or policies for this and that. Our board
governs by doing.’’
Our response is that all boards are ‘‘governing boards’’ in that
they share the same fiduciary responsibility for their organization.
A working board is a governing board whose members also carry
out some or all of its activities. Perhaps we can illustrate this more
clearly by demonstrating the different roles that board members
can play by using a simple analogy.
The Three Hats of Nonprofit Board Members
Figure 1-1 describes three ‘‘hats’’ that may be worn by nonprofit
board members, a hat being a symbol of the role that the board
member is playing at the time. The first of these is the governance
hat, which is worn only when the board member is attending a
board meeting or committee meeting. All board decisions are
made while wearing this hat. This is the hat that you are wearing
when you are looked at by the IRS and the state in which your
organization is registered. These and any other regulatory agencies
hold you accountable for how well you serve in your governance
role.
Imagine that there’s a hook on the door of your boardroom
that holds another hat. When you as a board member walk out
of a board meeting, you exchange your governance hat for your
volunteer hat, which is essentially what you wear whenever you
are outside board or committee meetings. In addition to your
FIGURE 1.1. The Three Hats Board Members Wear.
1. Governance Hat
(only hat that carries
legal authority
to govern)
2. Volunteer Hat
(this hat carries no
legal authority)
3. Implementer Hat
(carries limited authority,
but is seldom worn in
most boards)
Worn only when in a
properly called board or
committee meeting with
a quorum
Decisions made only when
part of the group wearing
this hat
CEO is accountable only
to governing policies set
by the board
Goes on when leaving
a board or committee
meeting
Worn when advising
the CEO
Worn when fundraising
Worn when helping staff
(alone or in a group) and
often under the supervision
of the staff
Seldom worn because staff
usually implement board
policies
But worn when a board
resolution or the CEO gives
a board member authority
to implement some board
action
Hat is removed when task
is done
board duties, you may very well be a resource for the CEO and
the staff, possibly providing personal counsel, offering a particular
expertise, or just generally helping out. If you are a board member
for an organization that has few staff members, you may find
yourself volunteering often. Regardless, if you are not in a board
meeting or a committee meeting, you are wearing your volunteer
hat. And rather than the CEO working for you, as a volunteer,
you are working for the CEO or her staff.
How about the third hat—the implementer hat? This is a variation
on the volunteer hat in that the board member is serving in
a direct staff role, not a governing role. The distinction here is that
a board member wears an implementer hat when he is carrying
out a specific task that the board has authorized him to do. For
example, a board member wears the volunteer hat when he is helping
the CEO in fund-raising, but let’s say that the board appoints
her, by board resolution, to actually be in charge of fund-raising
because there is no one else to do it. For that specific task, the
board member would be wearing an implementer hat.
For board members who essentially serve as the staff for their
organization, it is important that they know what role they are
playing at any given time. They work together as a governing
board, then function more independently to implement the board’s
policies.
In summary, all nonprofit boards have the responsibility to
govern. Some boards may require more of their board members,
but none should require less. And it’s that governance function
that is the focus of the roadmap. Because all boards have a duty
to govern, and because our roadmap serves the governance function,
we believe that the roadmap applies to all nonprofits, regardless
of their budget, size of staff, or complexity of operations. In
other words, whether a nonprofit has many staff or no staff, at
least the board members need to learn how to govern.
The next question is, how does one measure the quality of
governance in a nonprofit organization? Further, is there a continuum
along which a board can move its governance from good to
great? There are several definitions of ‘‘good governance,’’ which
it may be helpful to explore before getting directly into the
roadmap.
