Transcript Nonprofit Board Performance - National Human Services Assembly

National Assembly ELI:
Dynamic Nonprofit Board
NATIONAL ASSEMBLY OF HEALTH AND HUMAN
SERVICE ORGANIZATIONS
Presentation document
November 14, 2003
BACKGROUND ON BOARD GOVERNANCE MATERIALS
The following materials were prepared to facilitate a session on board
governance for the National Assembly’s Executive Leadership Institute.
Materials were based on findings from the McKinsey & Company report:
The Dynamic Nonprofit Board: Lessons from High-performing Nonprofits.
In addition, the results of surveys and interviews with members of the
National Assembly as well as input from McKinsey teams serving nonprofit
organizations on this topic were incorporated.
These materials were intended to stimulate a discussion among National
Assembly members on the topic of effective board governance. Topics
covered included:
• Board governance framework and perspectives
• Key challenges to maximizing board contributions
• Actionable ideas for improving the performance of your board
Organizations could use the materials to stimulate a conversation around
current board performance and future priorities. To that end, we have also
developed a board self-assessment survey to help boards assess their
current performance against best practices. A copy of the report is
available at www.mckinsey.com/practices/nonprofit/ourknowledge
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CONTENTS
• Board governance research and framework
• Survey and interview results
• Common challenges and lessons learned
2
BUILDING EFFECTIVE BOARDS OFTEN ARISES AS A KEY CLIENT
CONCERN
“The motion has been made and seconded
that we stick our heads in sand”
“Perhaps it would help if I go over it one
more time”
3
IN RESPONSE, WE LAUNCHED A RESEARCH PROJECT
FOCUSED ON 3 MAJOR QUESTIONS
Key
questions
• How important is a high-performing board?
• What are the characteristics of a highperforming board?
• What are the best practices in building a
high-performing board?
• Interviews with board members and CEOs of
Methodology
Worth Magazine Top 100 Nonprofits
• Interviews with McKinsey nonprofit client
teams
• Literature review and assessment
• Report with lessons learned and example
End
products
practices
• Set of promising practices to jumpstart
board performance
• Board self-assessment tool
4
THE DYNAMIC NONPROFIT BOARD FRAMEWORK
Environment
Monitor external and
internal environment to
highlight areas for
board attention
Ensure quality
performance across
3 key board roles
Monitor and improve performance
Develop set of enabling
practices around board
composition, size
structure, and processes
Enablers
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3 KEY ROLES ENCOMPASS NINE DETAILED RESPONSIBILITIES
• Select, evaluate, and
develop the CEO
• Shape the mission
and vision
• Engage actively in
strategic decision
making and policy
decisions
• Ensure adequate
financial resources
• Provide expertise and
access for organizational
needs
• Enhance reputation of
organization
Monitor and improve performance
• Oversee financial management and
ensure appropriate risk management
• Monitor performance and ensure
accountability
• Improve board performance
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ADDITIONAL LESSONS LEARNED FROM OUR RESEARCH
• While effective boards perform a comprehensive set of roles,
they recognize the risk of being mediocre at everything; pick
your spots carefully to allot valuable time where needed
• Recognize performance management as one of the board's core
roles on par with strategy-setting and fundraising; take on the
challenge of leading without stepping on staff toes
• Invest significant time in board self-evaluation and continuous
improvement
• Sweat the little things: good meeting agendas, open
communication, having fun
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CONTENTS
• Board governance research and framework
• Survey and interview results
• Common challenges and lessons learned
8
OVERVIEW OF SURVEY RESPONSES
Who responded . . .
• E-mailed electronic survey to 70 member organizations
• 35 individuals responded
• 29% of respondents- board members, 63% CEOs, 8 %
Other managers
• Average board size – 27 (minimum of 7, maximum of 71)
• 86% have an Executive Committee (Average size – 9)
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NATIONAL ASSEMBLY SURVEYS INDICATE MEMBERS FEEL THEY ARE
NOT TAPPING BOARDS’ FULL POTENTIAL
Do you feel you are tapping
board’s potential?
Why or why not?
“We haven’t demanded it.”
83
“We constantly need better
definition and communication
of expectations.”
17
Yes
“We have relied excessively
on the outstanding
performance of the CEO.”
No
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SUMMARY OF RESULTS HIGHLIGHT RELATIVE AREAS OF BOARD
STRENGTH AND OPPORTUNITIES FOR DEVELOPMENT
Areas of strong performance
• Engage actively in strategic decision making and policy
decisions
• Select, evaluate, and develop the CEO
• Enhance reputation of organization
• Provide expertise and access for organizational needs
• Oversee financial management and ensure appropriate risk
management
Areas in need of development
• Shape the mission and vision
• Ensure adequate financial resources
• Monitor performance and ensure accountability
• Improve board performance
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MEMBERS REPORT THEIR BOARDS DRAW AN APPROPRIATE LINE
BETWEEN STRATEGIC AND TACTICAL INVOLVEMENT
Tactical/operational
“Our board is very
operational and
the staff pulls the
board to
operational issues
because of our
‘way of work’ with
committees”
Strategic
“This is
something we
monitor closely.
We are candid
when we feel the
line has been
crossed”
“The board is not
likely to cross into
management as it
adheres quite
clearly to its own
policies for board/
staff interactions”
“If the board has a
fault in this area, it
is not being as
fully engaged as it
could be in
strategic
guidance”
• Overall 92% of members feel that their boards’
provide an appropriate level of strategic guidance
without infringing on the role of management
• Result potentially driven by the fact that 79% have
board committees focused on strategic priorities
and 58% have robust strategic plan*
* Includes situation analysis, with peer review, threats, opportunities, sector overview
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BOARDS ALSO EFFECTIVELY ENGAGING IN CEO EVALUATION
Members use a variety of
review processes . . .
. . . leading to a set of
follow-up activities . . .
. . . and led by various members
of the organization
• “Board conducts an annual
• “Results are
• “The executive committee is
review based upon
outcomes of the
organization”
• “The CEO writes an annual
plan and meets a minimum
of 4 times a year with the
committees around the
performance plan”
• “To date, we’ve not had a
formal performance review
of the CEO, but are
planning to institute one for
next year”
• 75% of members have preagreed written criteria
incorporated into
ongoing monitoring”
• “Mentoring, training as
needed . . .”
• “Annual progress
review . . . is reflected
in salary revisions”
responsible for CEO
reviews”
• “Review done by Chairman,
Chair Elect, Chair Emeritus
and Chair of HR committee”
• “The Executive Committees
and the Executive
Compensate Committee
have full responsibilities in
this arena”
• “The board chair does the
performance review”
• “Done by officers and
reported to board”
• 33% of members use 360°
evaluation processes
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MEMBERS SUCCESSFULLY TAP INTO VARIETY OF BOARD EXPERTISE…
Methods of tapping into expertise
Areas of greatest assistance
• “We maintain a detailed list of
• Legal
board members’ individual
expertise as well as interests”
• “Through a phone call.”
• “Members recruited according to
expertise/influence matrix, assigned to
committees / task forces accordingly”
• “We tap board member expertise through
[the appropriate] committee”
• 83% of members have a staff point
person for managing board/staff
relationships
• Legislative
• Human services issues
• Program guidance
• Media
• Investment
• Diversity
• Networks/connections
• Writing contributions for
publications
• Public speaking
• 79% use a diversity grid for mapping
out areas of expertise
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… ALTHOUGH THE TYPES OF RECOGNITION BOARD MEMBERS RECEIVE
FOR THEIR CONTRIBUTIONS VARIES CONSIDERABLY
“Satisfaction through
participation in a premier
nonprofit organization
that is leading edge”
“Personal ‘thank you’
from the CEO and
Chairman”
“Not much”
“Press releases in their
home areas,
installation at the
national conference”
“National public
recognition through
publications and national
organization meetings”
“. . . an opportunity to
connect with an impressive
board and staff”
“Years of service, committee
chairs, president’s award,
humanitarian award”
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MEMBERS HAVE ALSO BEEN LARGELY SUCCESSFUL IN
LEVERAGING BOARD CONTACTS TO GAIN ACCESS
• “We use certain board members with
asks for grants. We ask all board
members to appeal to their employers
for just about anything”
• “We asked our board members to
connect with Congress on [an] issue
and it was very successful”
• “Each board member brings a network
of contacts and previous involvement.
We seek to discover those
connections and use them”
• 83% of members have boards
that connect their
organizations to public,
corporate, foundations, or
other actors
• 83% of members have board
members that represent the
organization and its interests
at external meetings
• “[We are] just beginning to take
advantage of this . . .”
16
MEMBERS REPORT STRONG BOARD INVOLVEMENT IN RISK
MANAGEMENT ROLE
Boards are confident in their
understanding of potential risks . . .
. . . and actively manage their
organizations’ risk exposure
• 88% of boards have a list of closely
“We consider safety, brand, image”
watched financial metrics and ratios
• 96% of boards are aware of their
organization’s financial exposure
• 83% of boards have a clear
understanding of the nature of the
organizations’ liability and
reputational risks and have
strategies to mitigate them
“[We have] open discussions with
General Counsel present”
“We follow advice from the CEO
and board members with
expertise in that field”
“Board committees continually
look at these issues, including
financial, legal, and public
reputation risks”
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SUMMARY OF RESULTS HIGHLIGHT RELATIVE AREAS OF BOARD
STRENGTH AND OPPORTUNITIES FOR DEVELOPMENT
Areas of strong performance
• Engage actively in strategic decision making and policy
decisions
• Select, evaluate, and develop the CEO
• Enhance reputation of organization
• Provide expertise and access for organizational needs
• Oversee financial management and ensure appropriate risk
management
Areas in need of development
• Shape the mission and vision
• Ensure adequate financial resources
• Monitor performance and ensure accountability
• Improve board performance
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SURVEY RESULTS INDICATE POTENTIAL FOR IMPROVEMENT ON BOARD
ROLE IN DRIVING MISSION AND VISION
Board performance on
shared understanding of
the mission . . .
. . . mirrors their use of
tactics to connect the
board to its mission . . .
. . . and leads to significant
vision issues
• “46% of members have
• 42% have a mechanism
• “Our board fails to set
a board where EVERY
director can summarize
the mission of the
organization, where it
hopes to be in 5 years,
and why it is an
effective agent of
change
for board members to
participate in program
activities
• 42% of members
periodically focus
meetings solely on
mission
• “63% explicitly discuss
decisions as they
pertain to mission and
develop “case law” for
future decisions
high expectations”
• “We need the board’s
help with strategic
visioning”
• “[Our board needs] to
help ‘raise the bar’ by
asking us tough
questions on key issues”
• “The board is reactive not
proactive . . . I’m
redefining everything and
bringing it to the board for
approval i.e., mission,
vision, strategic plan,
etc.”
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MEMBERS REPORT DISSATISFACTION WITH BOARD FUNDRAISING
PERFORMANCE
There are mixed fundraising
expectations . . .
. . . and few organizations
have put processes in
place to encourage it . . .
. . . but most are
disappointed by board
fundraising performance
• “Everyone is expected to
• 21% set individual board
• 77% of respondents
contribute. [There is a]
Formal solicitation with
specific ask”
• “There currently is no
expectation of financial
contribution . . .
influenced by the reading
some have of the carver
model”
• “No current explicit
financial contribution
levels are required . . .
although a total board
fundraising goal is set”
member fundraising
goals
• 38% provide board with
indicated a desire to
improve board’s
fundraising
training on fundraising
• “We provide every
member
with a document that
describes board member
responsibilities, including
financial contribution
expectations”
20
SURVEYS HIGHLIGHT ISSUE AROUND BOARD ROLE IN ENSURING
ACCOUNTABILITY
“To whom is your board accountable?” . . .
“We haven’t worked out a
good board accountability
strategy yet”
“We haven't done this”
“Our board is
accountable to the
organizations we serve”
“Members”
“Good question!”
“To the persons served,
their families, and their
communities”
“We have no
shareholders. It is not a
membership movement”
"Unaccountable”
Only 38% of
members receive
feedback directly
from service
recipients to the
board
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SURVEYS INDICATE OPPORTUNITY TO IMPROVE LEVEL OF BOARD
INVOLVEMENT IN PERFORMANCE MEASUREMENT ROLE . . .
71% of boards play an active
role in measuring operations
performance
• “Key areas of the strategic plan
are monitored. Balanced
scorecard used. Specific goals
are set in finance, resource
development, and HR”
• “[We monitor] through a variety of
standing committees”
• “[We monitor] mostly by adherence
to strategic plan goals”
42% of boards play an active
role in measuring program
performance
• “Our board’s role here is limited”
• “They focus on ends rather than
means – they don’t get involved
in measuring individual
programs”
• “We don’t do this”
• “They review the data provided
by management”
• “We review our success
• “The CEO who is in charge of
operations is evaluated”
regularly with the board, but
not at a huge level of detail”
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. . . SPECIFICALLY AROUND SETTING PERFORMANCE INCENTIVES
Most boards address performance
issues once raised…
…but most do not take specific
actions to encourage performance
before an issue arises
• “[The board] can vote to terminate a
• “Our board doesn’t hold our
program”
• “This has not yet happened, but the
policies call for a corrective action
plan”
• “Usually staff has already prepared
some recommendation for change or
improvement”
• “We have arranged for executive
coaching”
feet to the fire”
• “The board is not really
engaged in this”
• “Fortunately for the
organization I’ve been selfmotivated and driven for the
organization for over 10 years”
• “This would impact incentives,
taken into consideration with
compensation”
23
SURVEYS ALSO INDICATE BOARDS SPEND LIMITED
TIME ON SELF-EVALUATION
• 35% of organizations evaluate individuals and overall
board performance
–21% of organizations give individual board member feedback
–67% have a board development and evaluation committee
–46% use an assessment tool for evaluating board
performance at a regular interval
• Those organizations that do evaluate board performance use
a variety of methods
–“We evaluate at every meeting in writing”
–“Individuals are evaluated each year by the Board
Governance Committee based on engagement, level of
engaged, funds raised and contributed, added value”
–“Periodically the board as a whole does a self-evaluation”
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CONTENTS
• Board governance research and framework
• Survey and interview results
• Common challenges and lessons learned
25
SEVERAL CHALLENGES WERE RAISED WITH REGARD TO ENABLING
EFFECTIVE BOARD PERFORMANCE
Several boards identified challenges . . .
. . . but many had suggestions for how to improve
“Time and expense of travel”
• “Setting regular monthly committee meetings
and making them accessible by phone”
“Better attendance at board
meetings. Greater participation in
committees”
• “By publishing a calendar of meetings and
“[Achieving] diversity of voice, gender,
ethnicity”
• “Keep matrix of board make-up that informs
“Achieving the balance between clout
and local constituencies”
• “Highest clout on executive committee,
“The Board is too big”
• “One solution is regular communications
events, people will make every effort to
incorporate them into their schedules”
selection of new board members”
special constituents on board committees”
•
“Leveraging people in the right way”
using multiple vehicles”
“We have mentors and mentoring to help
members grow”
• “Be direct and transparent”
• “The non-financial and financial
expectations of new board members are
shared during the nominating process and
during their orientation”
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CHALLENGE OF RECRUITING HIGH-PROFILE INDIVIDUALS WAS MOST
OFTEN RAISED AND ADDRESSED
“What strategies have been most effective? . . .”
“Get the organization, corporation, or individual involved in one of our programs or
program events”
“Identify an easily understood issue that resonates personally or intellectually with
the member rather than try to explain the overall value of the organization”
“What seems to work is to treat it very seriously. Force [potential members] to do a
due diligence on the org and examine whether they are truly committed”
“Also be direct and honest on expectations. Treat it like a business deal and they will
understand that”
“Who is best position to recruit successfully? . . .”
“. . . it appears to us that the best technique is to use local association leaders to
identify, recommend and help recruit such persons”
“Get one or two high profile board members . . . have them recruit people they
know”
“Having a CEO who attracts such persons”
“ We've been successful where Board members have personal relationships with
high-profile candidates”
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