Board Member WorkshopFebruary 2, 2015

Haas School of BusinessUC Berkeley

Agenda

3:00 – 3:10 Welcome

3:10 – 3:30 Dynamic Board Lessons

3:30 – 3:45 LinkedIn For Good

• Nonprofit Resources

3:45 – 4:00 Speed Networking

4:00 – 4:45 The Intersection of Finance & Strategy:

Using Financial Data to Inform

Strategic Decisions

4:45 – 5:00 Wrap Up

2

Boards and Directors have Legal Duties of

Care, Loyalty and Obedience

3

Duty of

care

Duty of

loyalty

• An obligation to act in good faith

– with best interests of nonprofit

in mind – with such care of a

reasonably prudent person

• Be informed e.g.

– Attend meetings regularly

– Seek and review necessary information

• Exercise independent judgment

– Ask questions – avoid simply going along with

other directors

– Rely only on judgment of dependable sources

• An obligation to keep

confidences of nonprofit and

avoid actions that benefit self at

expense of nonprofit

• Avoid self-dealing transactions

• Where directors’ firm provides services

or products to nonprofit, make conflict known

to board, recuse self from discussions/votes

Duty of

obedience

• Required directors to comply with

applicable laws, adhere to

bylaws and remain guardians of

the mission

• Understand mission and bylaws

• Ensure regulatory filings completed

• Require operation audit and policy review

Hold public benefit corporation “in trust” for the community

Types of Boards

Organizing Board– small, homogeneous, informal – committed to purpose– Very hands on to support start up

Governing Board– larger and more diverse board– committees become important– shared authority between board and staff: board chair and

executive director are principal leaders– transition to governing board takes at least 3 years and a lot of

staff time

Institutional Board– very large (35-60 or more)– prestigious -- includes large donors or those with access to funders– accepts significant responsibility for fundraising– often delegates some governance to executive committee

4

Creating a Dynamic Board

• Monitor external and

internal environment to

prioritize areas for

Board attention

• Ensure quality

performance across 3

primary Board roles

• Develop a set of enabling

practices around Board

composition, size

structure, processes, and

staff relationships

Monitor and improve performance

Environment

Enablers

5

9 Responsibilities of Nonprofit Boards

Monitor and improve performance

• Select, evaluate

and develop CEO

• Ensure adequate

financial

resources

• Lend expertise;

provide access to

people

• Protect/enhance

reputation of

organization

• Oversee financial management, ensure

appropriate risk management

• Monitor performance, ensure accountability

• Improve board performance

• Shape, clarify

mission and

vision

• Engage actively

in strategic

decision making

and policy

decisions

6

The Governance Gap

• 97% said that a high-performing board was important to a high-performing

nonprofit...

— However, only 19% said they were tapping their boards’ full potential

• 94% felt that their boards provide the appropriate level of strategic guidance…

— However, only 46% thought that their directors would be able to summarize both

the mission and the vision of their organizations

• 77% of respondents indicated a desire to improve board fundraising, but…

— Just 21% set individual board member fundraising goals

— Just 38% provided fundraising training

— Moreover, a mere 16% reported having individual board members receive formal

feedback on their performance at a regular interval

• Source: McKinsey survey of social services organizations

7

Board Performance GPA

0 1 2 3 4

Fundraising

Increasing diversity

Community relations

Strategic planning

Monitoring performance

Knowledge of programs

Supporting CEO

Legal/ethical oversight

Financial oversight

Understanding mission

Director view

CEO view

Source: Boardsource Nonprofit Governance Index 2010

Survey response to “give your board a letter grade” on each dimension

8

6 Enablers are Key to Closing Execution Gap

1. Working on the right things at the right time

2. Effective board leadership must drive for a true

partnership at board and committee level

3. A trust-based relationship with CEO as an

underlying foundation

4. Sweating the details on process is critical to

board function and engagement

5. Composition requires needs-based

management and a graceful transition mindset

6. Size and structure are a balancing act but must

ensure coverage of 9 responsibilities 9

Self Assessment Is Critical

Select, evaluate

and develop CEO

1 Poor 2 Average

3 Good

4 Distinctive

Succession planning Board has no clear succession plan Board has informal discussion

with CEO on succession and on

identifying candidates before

need for a CEO transition arises

Board has explicit view on

succession and works with CEO to

identify internal candidates with

leadership potential

Board has explicit view on succession and actively works with the CEO to identify internal candidates and provide development opportunities for the top 3-5

candidates to “round out” their

skills

Evaluation and development process

Evaluations are subjective and occur on ad-hoc basis; most board members are unaware of process or feedback messages

Evaluations performed annually against preagreed criteria; board members have opportunity to provide input to process

Evaluations performed formally and annually against pre-negotiated goals; written feedback messages are reinforced through CEO compensation

Evaluations performed at

annually against predefined

gooals; evaluation includes 360-

degree feedback and includes a

self-assessment by the CEO.

Written feedback includes skill

development plan. CEO

compensation decision

reinforces view of performance

10

Importance Ratings Vary Greatly by Organization

Q: Over the next one to two years, how important is it for your Board to focus on:

1 2 3

1 2 3

1 2 3

1 2 3

1 2 3

1 2 3

1 2 3

1 2 3

1 2 3Low HighMedium

Rated Importance

Group Average Group Response Range

1. Clarifying the organization’s mission

or vision

2. Resolving key strategic or policy

issues

3. Developing CEO capabilities

4. Developing financial resources to

support strategy

5. Providing expertise or access to

support organizational priorities

6. Building the reputation of the

organization with key stakeholders

8. Assessing performance against

mission and key program priorities

7. Overseeing financies and ensuring

adequate risk management

9. Improving Board performance

Ensure Leadership

and Resources

Monitor and Improve

Performance

Shape Mission and

Strategic Direction

11

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

0.8 0.9 1.0 1.1 1.2

Dynamic Boards Set Priorities Based on

Need and Performance

12

Relative Performance (ratio vs average response)

Rela

tive P

riority

(ra

tio v

savera

ge) Change Maintain

Quick fix only Reduce effort

Ensure Resources

Improve Board Performance

Shape M/V

Enhance reputation

Monitor org

performance

Provide expertise and accessShape strategy

Develop CEO Oversee

financial

performance

• Roles Matter: There are 9 clearly defined responsibilities of a nonprofit board,

with a gold standard of performance for each. Increasing emphasis on:

• Multi-year planning

• Performance measurement and accountability

• Risk management

• Sweat the Enablers: Good governance is in the execution

• Pay attention to the enablers of execution, including the small stuff

• Board Chair as CGO

• Understand and address the “human” aspects of director interests and

styles

• Pick Your Battles: There are lots of ways boards, as entities and directors as

individuals, can help. Pick your spots carefully to allot valuable time where

needed most

• Look in the Mirror: Invest significant time in board evaluation and continuous

improvement

Summary Take-Aways

13

A Good Board is a Victory, Not a Gift

Cyril Houle

14