How Boards Contribute to Organisational Sustainability
Recently a peak body in the philanthropic sector asked me to offer their members some thoughts on how boards contribute to building sustainable organisations. They were looking for advice to organisations that are struggling to meet growing community needs in an increasingly complex society. As those kind of organisations have found, the aim of ‘doing good’ is not enough on its own. Survival – and ‘thrival’ – is not guaranteed no matter how noble an organisation’s intent. I made the following suggestions. Arguably, these are just as applicable to ‘for-profit’ as ‘for-purpose’ organisations. (1)
Clarify and stick to organisational purpose
The central intellectual challenge for any board is to be clear about why its enterprise exists, what benefits it must deliver and for whom. High-sounding but empty vision and mission statements are of little use when difficult choices need to be made. Being typically couched in broad and ambitious terms those set an organisation up to fail. Lack of a clear (and realistic) purpose makes enterprises of all kinds vulnerable to undue influence from the competing agendas of strong minded individuals inside the organisation and different stakeholders outside it. As a result, organisations are easily drawn into forms of activity and resource consumption that do little to deliver on their primary reason for existence.
Articulate and demonstrate strong values
For-purpose organisations are inherently values-based but there are few organisations of any type which do not at least tip their hat to corporate values. When an organisation’s values are not clearly articulated, and board members’ and senior staff members’ actions are not consistent with them, signals as to what is the right thing to do are confused. There are many examples of organisations going off the rails because their organisational values were inherently weak - neither clearly stated nor, in particular, consistently applied.
Develop effective board teamwork
Governance by its very nature is about effective organisational leadership by a group of people making decisions collectively. However, as board members spend comparatively little time together, achieving the necessary level of teamwork requires deliberate and constant attention. Unfortunately, too few boards acknowledge the importance of effective teamwork. Consequently, at the very least they end up underperforming their potential. Worse they find themselves paying a significant price for group dysfunctionality. As John Carver once commented, too many boards tend towards being ‘incompetent groups of competent people’
Be disciplined in board-related work
The board’s governance responsibilities, including the expression of accountability for organisational performance to owners (‘moral’ as well as proprietary owners), cannot be delegated to managers and other staff, no matter how competent they are. While only the board can govern boards of all kinds are easily drawn into management. There are many reasons for this which are beyond the scope of this article to explore. However, clear role descriptions and active meeting agenda management and longer-term work planning will assist to ensure that the board is spending its time on the things that matter from a governance perspective.
Understand how the organisation goes about its business
To be effective in ‘direction giving’ a board must understand what the enterprise does to fulfil its purpose. It therefore needs to have people around the board table who already have appropriate skills, knowledge and experience and others who are willing to learn. This is not so the board may do the work of the organisation but to understand the realities faced by those who are at the workface. The board must have a collective understanding of and provide support for, the people, systems and processes that are vital to organisational success.
Focus mainly on the future
It is a cliché – but also acknowledging reality – to observe that most organisations have to cope with a rapidly changing operating environment. Boards must keep up with and even get ahead of the pace of change in their sector. It is depressing, therefore, to see the way many boards waste the greater part of their board meetings buried in operational detail and reviewing reports on past performance. A board must learn from the past, but it constantly stands on the steps of the future; it can only influence what has not yet happened. Ideally, a board’s attention should be primarily focused on designing the future not documenting the past.
Hold those who serve to account
In the for-purpose sector, organisations often rely heavily on volunteers to both govern and staff their organisations. Into the bargain, paid employees tend to be underpaid relative to what they might earn somewhere else. Because people, both paid and unpaid, are motivated by ‘doing good’ and, into the bargain are sacrificing something to be involved, this situation is too often used to excuse bad behaviour and under-performance. If the purpose of an organisation justifies its very existence, it is important for boards to demand accountability for value-adding performance from everyone in the organisation, including from themselves.
Measure and monitor the right things
An important aspect of accountability is verification of desired performance. Because an organisation exists to deliver some sort of benefit to people outside the organisation, board monitoring of organisational performance must be outcome rather than activity based. In the first instance, you don't need to know what your staff have been doing or how hard they have been working. You do need to know what they have (or have not) done has been beneficial. That is why starting with clarity of organisational purpose and what it must achieve, is so vital.
Constantly strive for improvement in organisation performance
In this changing world, preserving the status quo is not an option. A static organisation is going backwards. The board needs to be progressive in its thinking - not wedded to what may have been relevant - and worked (or not) - in the past. What does future success look like? What are we doing to better fulfil the purpose of our organisation? How well are we coping with change? How effective are we in implementing our plans? Do we support (or discourage) innovation and risk-taking? Are we challenging ourselves and our people to do better?
Be active in partnering with the chief executive
There is an inherent asymmetry of power in the board/chief executive relationship. For example, the board has positional power as the chief executive’s employer, but the chief executive has significant influence over the information flows that provide the foundation for the board’s work. For many other reasons as well, both board and chief executive are mutually dependent and must achieve an effective collaboration. This requires active and candid dialogue between both parties about their mutual expectations. Don't let your board become seen as a brake on organisational growth or worse a 'damage control challenge’. Recruit and retain the best person for the top job and, having made that choice actively partner with the chief executive and support them to succeed in the role. Expect reciprocal support from your chief executive.
Actively engage with stakeholders
Boards must communicate directly with key stakeholders -particularly those on whom the organisation depends. Have you defined who your most important stakeholders are? Do you understand how they see you? Have you made sure they understand how you are responding to their needs and expectations? Have you communicated with them sufficiently well that their expectations of you are realistic? Are you confident they will support you in a crisis, not throw you under the bus?
Deliver effective succession planning
To grow and be sustainable organisations need to free themselves at the governance level from the gravitational pull of their founders and other longer serving leaders. This requires an active process for reviewing board and board member effectiveness and routinely refreshing the board’s membership as the organisational challenges change. Board membership is a privilege not a job for life. Planning of this kind should be accompanied, and informed by, regular and genuine performance review of both the board as a whole and its individual members. Relevance and value of contribution should be the determinant of membership longevity on any board.
Organisational sustainability has many different dimensions. I have outlined many of those that relate primarily to the board. These either cannot or should not be delegated to staff. Successful long-term stewardship of any organisation requires active and accountable governance by the board across a wide range of processes. Good governance, like organisational sustainability does not happen by chance.
It will be obvious and perhaps disconcerting to some readers that my list makes no mention of the pursuit of ‘financial’ sustainability. Having the funds it needs may well be the ultimate test of survival for any organisation but the omission is deliberate for several reasons. Partly it is because fund raising usually dominates discussion about sustainability in the not-for-profit governance literature. And, also, because it is obvious an organisation must have sufficient financial capacity to fulfil its purpose. Mostly, though, it is because fundraising per se is an operational activity requiring professionalism and increasingly sophisticated methods. When a ‘give, get or get off’ mentality drives board member selection it too often leads to boards that lack the competence and motivation to do the primary and un-delegateable work of the board, key elements of which I have described above.
(1) Of course, all organisations implicitly have a purpose. The term ‘for-purpose’ organisation is used here for those organisations whose primary purpose is to deliver benefits to recipients without an expectation of commercial return.