Governance Effectiveness Workshop Sunday July 29 th, 2012 Yvonne D. Harrison, PhD

“IN THEORY, THERE IS NO DIFFERENCE BETWEEN THEORY AND PRACTICE; IN PRACTICE, THERE IS” YOGI BERRA “BOARD CHECK-UP” HELPING NONPROFIT BOARDS BRIDGE THE GAP BETWEEN THE IDEAL AND REALITY IN THE GOVERANCE OF NONPROFIT ORGANIZATIONS

Overview Gap between theory and reality in board effectiveness Paradoxes facing boards Self-assessment tool to bridge them Practicing self-assessment Effectiveness of boards that have participated in the research

In theory… The board represents the owners of the organization The board represents the owners of the organization The board is the ultimate governing authority of the organization and is legally liable for its actions The board is the ultimate governing authority of the organization and is legally liable for its actions The board exercises duties of diligence, care and loyalty in the governance of the organization The board exercises duties of diligence, care and loyalty in the governance of the organization The board may delegate day-to-day management to a Chief Executive Officer however it remains responsible for setting the strategic direction and broad policies within which the CEO must manage The board may delegate day-to-day management to a Chief Executive Officer however it remains responsible for setting the strategic direction and broad policies within which the CEO must manage

The reality of governance… It’s not always clear who the “owners” areIt’s not always clear who the “owners” are Boards often lack time and resources for closely monitoring owners’ wishesBoards often lack time and resources for closely monitoring owners’ wishes The views of stakeholders are not always uniformThe views of stakeholders are not always uniform Many board members lack expertise in the organization’s “business” so find it difficult to establish strategic directions with confidenceMany board members lack expertise in the organization’s “business” so find it difficult to establish strategic directions with confidence Due diligence too often tends to stop at financesDue diligence too often tends to stop at finances Too little time is actually spent on discussion of strategic issues and assessing performanceToo little time is actually spent on discussion of strategic issues and assessing performance

Paradoxes facing Boards More information and tools are available on how to improve board performance (Murray, 2004; Lichenstein & Lutz, 2012) More information and tools are available on how to improve board performance (Murray, 2004; Lichenstein & Lutz, 2012) Many boards recognize the need to assess board performance (BoardSource, 2010). Many boards recognize the need to assess board performance (BoardSource, 2010). Empirical research shows a link between the practice of self-evaluation and improved performance (Herman and Renz, 2004). Empirical research shows a link between the practice of self-evaluation and improved performance (Herman and Renz, 2004).YET Improving governance is one of the biggest challenges facing nonprofits (Murray, 2004; Bell et al, 2006) Improving governance is one of the biggest challenges facing nonprofits (Murray, 2004; Bell et al, 2006) Many boards lack the time, financial resources, and technical expertise to conduct performance assessments (BoardSource, 2010; Holland, 1991) Many boards lack the time, financial resources, and technical expertise to conduct performance assessments (BoardSource, 2010; Holland, 1991) There is a lack of theory that explains why and how boards become effective (Harrison and Murray, 2011) There is a lack of theory that explains why and how boards become effective (Harrison and Murray, 2011) WHAT’S THE SOLUTION TO BRIDGE THESE PARADOXES?

Free Theory-Based Board Self-Assessment Research and Development Tool

Board Check-Up Diagnostic – Elements of the governance process – Factors that influence the governance process Method – Critical assessment process Information System – Self-assessment tools – Reports Governance Effectiveness Research Project – Descriptive—identifying the most challenging governance issues – Analytical—determining the significance of relationships between GE and OE – Theoretical—why do boards become ineffective? To what extent does the practice of BSA increase GE? What is the impact of BSA on nonprofit boards and organizations?

Board Check-Up BCU- IS BSABIA FU BSA BIA Board Self- Assessment (BSA): Outputs Information in Two Reports Board Impact Assessment (BIA): Change in Governance Effectiveness Board Check-Up Information System (BCU-IS)

InfluencesGovernance Process Effectiveness Influences Governance Process Effectiveness 9. Leadership CEO/ Board Chair 5. Structures & Processes 7. Composition and Development 8. Culture Roles and Responsibilities: 1. Fiduciary 2. Planning 3. Performance Assessment 4. Fundraising State of Board Effectiveness Nonprofit Organization Effectiveness WHAT WHO and HOW WHY CONCEPTUAL FRAMEWORK for RESEARCH PROJECT 6. Meetings

Method Examination is similar to a medical check-up – Symptoms. Understanding the issues that challenge boards. Check-Up helps boards define issues clearly and confidentially. – Diagnosis. Effort is made to understand the causes of issues through discussion and further examination. – Treatment. Once the issue has been properly diagnosed, a treatment program to remedy the situation should begin.

Your Turn to Practice the Governance Self-Assessment Process Guidelines include statements of issues and a framework for assessing them in nine dimensions Turn to your neighbour to discuss issues that challenge your board’s effectiveness. Use the guidebook to frame your discussion: – Discuss the symptoms as you see them in your organization. – What are the causes (diagnosis)? – Report out on any treatment you will consider introducing to your organization.

Large Group Discussion – What were the Symptoms? What are the issues? How significant are they in your organization? – What was the Diagnosis? Why do they exist/persist in your board and organization (i.e. what are the causes)? – Any Treatment? What strategies might resolve the issues? How would you go about implementing them?

1. How effective are nonprofit boards? Three measures: 1.Computed BE Score (272 Max Score)—M =195.79, SD = Levels of BE 3. Overall Perception of BE (4 point scale) Good (M = 3.0, SD =.71)

Board Effectiveness Total Scores

2. What issues are the most problematic?

2. What issues are the least problematic?

2. What issues challenge boards the most/least?

3. What is the relationship between board and organizational effectiveness?

4. To what extent do perceptions of board effectiveness vary?

4. To what extent do perceptions of board effectiveness vary?

Summary The reality is that bridging governance paradoxes is difficult. Board Check-Up is a tool to increase board capacity to conduct reliable and valid self- assessments. To return value, boards need to use the tool and critically consider the information generated from it. Discussion should acknowledge strengths and spotlight challenges Consider best practices that match the situation.