Buffet and Munger, close partners for 54 years are sometimes described as "being joined at the hip." Two Stanford professors have developed an analysis of Munger's comments on good corporate governance. (http://stanford.io/1fP454c) Using Munger's words, abstracted in italics from the Stanford analysis, here is what I estimate might motivate either of them to join a nonprofit board.
One solution fits all" is not the way to go. All these (corporate) cultures are different... You can't run all these places with a cookie-cutter solution.
Nonprofits often hold on to a start-up "cookie cutter" governance format, with its micromanagement focus, long after it is needed. Operational compliance has been the emphasis of nonprofit boards at the expense of strategic development. This has been documented through several current studies. *
A lot of people think if you just had more process and compliance -- checks and double checks and so forth -- you could create a better result in the world... We (Berkshire Hathaway) just try to operate in a seamless web of deserved trust and be careful whom we trust.
Mistrust can often be in the DNA of nonprofits. It can begin with the board, many of whom are business executives and who may mistrust the CEO because he/s has not run a business organization. The CEO can view the board as a continually revolving group with short tenures. It is possible that a new influential director may be appointed who may want to take the organization in a different direction. Many nonprofits are "flat" organizations, with staff members only one or two levels distant from the board. Staff can become overly concerned when board or management turnover occurs. Such changers can easily be harbingers of coming changes in their own positions.
When you have a really complicated place and a good CEO, you want him to have power to speak for the place in dealing with outsiders (example: with funders in the nonprofit arena)... I mean, of course he (the CEO) has to go back to check with his directors, but he knows what they're going to say, and everybody knows that what he says is going to govern.
Nonprofit organizations can be "complicated places" in the 21st century. Think of a university or even a small health care facility. My idea of a "good nonprofit CEO" is a person who is a professional manager. In a trusting nonprofit governance environment, this means he/s:
• Is a voting member of the board where permitted by law, is at least an ex officio member of the board and views the board as a support group.
• Is an "A" or "B" player who seeks to hire, management and staff personnel from the same groupings.
• Carries the title of president/CEO when the nonprofit leaves the start-up stage.
• Acts as the spokesperson for the organization in dealing with outsiders.
• Is an active partner with board in fundraising.
• Has a respectful relationship with the volunteer board chair and other board members.
• Helps create meaningful involvement for board members.
• Is comfortable wit the fact that the board audit committee needs to conduct rigorous reviews of the CEO and organizational impact annually.
• Portrays the board as a supporting organization to the staff.
People are going to adopt whatever the ethos is that suffuses the place... (This) form of civilization can reach... a seamless web of deserved trust -not much procedures, just totally reliable people correctly trusting one another... In you own life what you want is a seamless web of deserved trust. And if your proposed marriage contract is forty-seven pages, I suggest you not enter.
Peter Drucker is reported to have said, "Culture eats strategy for breakfast." Referring to nonprofits, as well as for-profits this means that procedures and processes can be set in place, but they have to be consistent with the organization's culture to have any strategic success.
Before any nonprofit board can go anywhere, it has to be convinced that a current system needs modification. Typically, the board will be divided into several groups on this issue: 1) people who want change, 2) people opposed to change (some staunchly so,) and 3) what I call process people.
Process people are well-intentioned, sincere individuals. However, the board chair has to manage these directors carefully, so they don't continue to look at one angle after another until they lose sight of the objective. Since they are often needed to achieve a majority vote to move forward, they can keep action in limbo indefinitely.
To motivate all three groups to consider change there needs to be a culture that generates critical thinking that eventually leads to responsible behavior, according to my reading of Munger's comments.
A Nonprofit Board That Might Interest Buffett or Munger?
• Directors may exhibit healthy skepticism, but there is widespread feeling of trust among board members, and the CEO. The staff then adopts a trusting attitude.
• Board leaders are in a position to occasionally prevent some directors taking the board in micromanagement directions.
• Focus on most meetings is on policies and strategies, not operational procedures and processes.
• The annual audit of outcomes and impacts is a rigorous one. "Trust but verify" is the overall environment in which the audit is conducted.
• Once a nonprofit trust based culture is established, succeeding board members must carefully nourish and understand its benefits.
• Although the CEO serves at the pleasure of the board, the board sees the CEO as a peer who is also the organizational spokesperson.
Would your nonprofit organization qualify?
*"2013-2014 NACD Nonprofit Governance Survey," (2013) National Association of Corporate Directors. Washington, D.C.
"Nonprofit Governance Index 2012, Data Report 1, CEO Survey of BoardSource Members, (2012) BoardSource, Washington, D.C.
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