Chinese Admonition: The wise man learns by his own experiences, the wiser man learns by the experiences of others.
Nonprofits can strengthen their governance procedures by experimenting with new ideas that have been successfully implemented in the for-profit sector. Whereas most nonprofit board chairs are independent directors (not part of management) and can be legally described as non-executive board chairs, some for-profits have two executive leaders: a board chair with management responsibilities and an elected independent "lead director." * The lead director is responsible for helping to focus the board on strategic planning and is empowered to call meetings of independent directors without the presence of management. Following are my interpretations of some insights from Mac Gardner, the non-executive board chair of Spirit Airlines, whose governance function is roughly comparable to the board chair of a nonprofit organization. (http://bit.ly/1jiCIAs)
Support Management Efforts
This obligates the chair to make sure that that qualified people are recruited to staff board committees. Examples: Recruit a director from the nonprofit's field of endeavor to serve on a program or strategic planning committee; recruit an attorney or accountant to serve on the audit committee. Finding qualified people to serve on nonprofit boards is an increasing concern. It is not unusual to see nonprofit nominating committees being pressured to nominate social friends or family members of current directors. The chair may need to use some of his political cache to overcome these types of traditions.
Communications Between the Board Chair and Management
A "surprise" decision presented by management can be an underlying fear of knowledgeable board members. For example: I served on one nonprofit board, and then quickly resigned. At a meeting, I learned that the executive committee , hurriedly agreed to acquire a subsidiary without a full discussion of the required board resolution. (The terms of an acquisition were a disaster.)
Weekly contacts between the chair and the CEO should be the modus operandi for nonprofits in the 21st century. Gardner suggests that a board chair can't over communicate with management. But in the nonprofit environment, excessive communication can lead to unhealthy micromanagement, because of the long nonprofit traditions to use this relationship mode between board and staff.
Gardner, at a minimum, has scheduled a weekly conference call with the CEO for an update on major operating/strategic issues. All board members are invited to join these conference calls if they are able. While technological enhancements, such as conference calls, can help board communications, both Gardner and I conclude that interpersonal contact is still a vital element that needs attention.
Both for-profit and nonprofit now have to function with more open formats. For example, some for-profit organizations are using the term "stakeholders" in their communications, recognizing that employees and vendors also are important constituents. Many nonprofits are showing their annual IRS 990 reports on their websites.
Nonprofit boards like for-profit boards know that some of their decisions are going to be criticized. For example the elimination of any legacy program will likely draw protests, no matter how low the program's revenue stream or enrollment.
Good news, is always easy to digest. However, a truly professional board of directors can handle bad news as long as management has been totally transparent with the board. No surprises!!
*I believe that a modified Lead Director format can be helpful to some nonprofit organizations, even though they have a board chair who is an independent director. (http://bit.ly/13Dsd3v)