According to an old Chinese proverb -- the wise man learns from his own experience -- the wiser man learns from the experience of others. A group of 300 for-profit directors recently took the time to answer questions posed by the RHR International and NYSE Governance Services. Their opinions were subsequently compiled and published in a major study "about the crucial elements in making and maintaining a strong board." (http://bit.ly/1qTjPXI) Following are my best estimations on how these findings can apply to nonprofit boards.
Quality of boardroom dialog and debate:
Achieving this objective in the nonprofit environment can be a challenge. First, even on boards that meet monthly or quarterly for a couple of hours, directors often don't have enough interactive time to get to know each other. Second, nonprofit board conflict is usually avoided because it can easily lead to interpersonal problems. Consequently, the board chair and CEO need to develop a board culture that allows for vigorous dissent as a positive process. One board chair I encountered faced with this challenge set a goal of trying to imitate more "conflicts" in board discussions. According to the above study, "The way board members operate together, not who they are, is what differentiates a great board from an average one...."
Ability to ask the tough questions of management:
As volunteers, nonprofit directors often find they must make decisions about issues that are far afield from their career interests, hobbies or their family interests. To effectively relate to management and staff, directors need to take time to better understand the environment in which the nonprofit operates. However, even without this background, it is possible to raise many fair and rigorous questions, such as the level of due diligence behind a recommendation or the impact of the proposal on coming budgets. A director should be duty-bound to ask these types of questions, even at the risk of embarrassing management and developing board conflict. In addition boards need to provide "constructive feedback to (individual) board members on the quality of their contributions." ...
Diversity of thought and experience:
While nonprofit boards select board members on the basis of their experiences, such as marketing, accounting or human relations and demographic divisions, little focus is placed on seeking to develop an inclusive board, with representation from all major stakeholder groups. (Example: Every board should have some people who have strategic perspectives.) Seeking these traits can only be done by reputation, not by career backgrounds. Developing such a board, within the confines of maximum board membership, is necessary to achieve diversity of thought. It also will require creative recruiting and ongoing director "maintenance" by the board chair and CEO to be certain that all directors are engaged in meaningful projects.
Summary
Nonprofit boards need to be evaluated on the way they work together with open dialog, debate and, at times, vigorous dissent. In my opinion, too many directors, because they do not have a financial investment in the nonprofit, vote to go along and/or to avoid conflict. Rarely do nonprofit directors vote "no" to record a different perspective on a proposal. Rigorous, but fair, questioning of management must be the norm. The need for nonprofit board diversity has been well documented for decades. A new view is evolving calling for nonprofits to develop inclusive boards. Some boards have moved in this direction, where legal by state law, to have the CEO as an ex-officious member or voting member of the board to represent staff stakeholders.
When extended to nonprofit board practices the RHR-NYSE study results provide some interesting bases for evaluating how nonprofit boards operate.