The Le Van Company
- helps nonprofits improve board governance,
- and mediates disputes involving non-profit boards.
We have grown accustomed to mediocrity in non-profit and public board process.... We have watched intelligent people tied up in trivia so long that neither we nor they notice the discrepancy. We have observed the ostensible strategic leaders consumed by the exigencies of the next month.... Effective people have a different standard of excellence for public and non-profit boards than for other pursuits, often tossing aside the principles of good management, and sometimes even common sense.... Boards, after all, will be boards!
I serve on several non-profit boards. Some are fledgling, some serve our local community, one manages over two billion dollars for constituents worldwide. Professionally I counsel family-owned business in generational transition. Most families ask me to help them “get organized” which usually includes consideration of an outside board of directors.
Recently, two of the non-profit boards on which I serve have asked me for some guidance. I referred them to Carver’s book but heard complaints that it is difficult to read. Because I think Carver’s ideas about non-profit boards are quite important and should be considered, I generated these notes. Consult the book for excellent examples and illustrations of board policy statements.
Carver has since published a workbook for non-profit boards, Reinventing Your Board: A Step-by-Step Guide to Implementing Policy Governance
(Carver & Carver 1997). I have not reviewed their workbook as of this writing.
Although my concern is primarily with non-profit boards, Carver’s scope includes public boards such as city councils. A great deal of what he has to say is equally applicable to boards of for-profit companies.
—Gerald Le Van
Gerald Le Van’s Notes on John Carver’s book,
Boards that Make a Difference 2d Ed. Jossey-Bass 1997
“There is one thing all boards have in common—they do not function.”
For-profit and non-profit. Carver begins by pointing out an essential difference between for-profit and non-profit boards. The best test of for-profit success is consumer judgment of the product and its price. The market automatically judges success or failure. Non-profits have no clean market test. Without market feedback to evaluate how they are doing, non-profits must rely on their boards to judge success or failure.
What goes wrong in non-profit boards:
- too much time on trivialities,
- short term time horizons,
- a reactive stance,
- reviewing-rehashing-redoing what staffs have already done,
- failure to hold the CEO alone accountable, and
- making decisions in uncertain areas without clarifying where the decision belongs.
Non-profit boards may create various “prescriptions” about their own activity and involvement in management. To some extent each may be useful but each is short-sighted. For example,
- Board members should be more involved, or less involved.
- The board should function as watchdog or cheerleader.
- The board should be a super manager with committees structured along staff lines.
- The board should limit its work to planning.
- The board should improve communications with staff.
Ordinarily these are problem-based prescriptions with origins in the organization’s history. The solutions may have outlived the problem. Prescriptions have been assembled from past experience as patchwork. Carver advocates design of board policies, not mere assembly.
Carver suggests that “helpfulness” is a red herring of voluntary non-profit boards. They do not exist to help the staff, but rather to own the business. “It is destructive to confuse helpfulness and ownership. By emphasizing their volunteer status, boards risk weakening their effectiveness.” Rather:
- Boards are fiduciaries: trustees.
- They are not managers but owners.
- The buck stops with the board.
- The board is the agent of a largely unseen principal.
- The board is a set of individuals operating as an entity. A board may have less discipline than an individual operating alone.
- Boards should operate more than the usual manager’s arm’s length from the next lower level of management.
- Governance is not the same as management. The board’s business is governance.
Carver’s designed model of non-profit board governance includes:
- “Cradle vision”: holding and supporting the vision of the organization. “There must be systematic encouragement to think the unthinkable and to dream”
- Guardian of organizational values. “Endless decisions about events cannot substitute for deliberations and explicit pronouncements on values.”
- Force an external focus: more concerned with the external “market” for its services than with internal mechanics.
- Be outcome driven: weigh all decisions against the organization’s explicit purpose.
- Separate large issues from small. Large issues deserve priority of time and attention.
- Force forward thinking into the future.
- Don’t just approve, create. Enable proactivity. Don’t just preside over momentum.
- Leverage diversity and unity. Address the need to speak with one voice without squelching dissent or feigning unanimity.
- Describe the board’s accountability to its consumers, neighbors, and staff.
- Define and adhere to the board’s self-discipline.
- Determine what information is needed; excise information that is excessive, inadequate, timely, and erroneous.
- Balance over-control and under-control. Neither “rubber stamp” nor meddler be. “Noses in, fingers out.”
- Use board time efficiently.
Making policy. The word “policy” includes both values and perspectives. “Value” is a belief or the relative importance of something. “Perspective” is a way of looking at something, an approach, a conceptual point of view. However, policy should not be just the sum total of what happens—it should be deliberate, chosen, and effectively pronounced.
“Leadership through explicit policies offers the opportunity to think big and to lead others to think big.” Policy-focused leadership is the hallmark of good governance because:
- The board can deal with many issues with less effort.
- Governance by policy doesn’t require special expertise, and can often be done better without experts.
- Addressing policy is more certain to deal with what is important.
- Focusing on policy stimulates dreaming, vision and inspiration.
For example: budgets are adopted with exhaustive attention to detail but scant review of the important policies imbedded in the numbers. Budgets make powerful nonverbal statements about policy in the organization—the projection of revenues, apportionment of risk, and allocation of resources among competing arenas. Budgets are often the most important policy statements.
To lead instead of follow, boards must get to the other end of the parade. “Rather than following the agendas driven by what the staff wants approved, boards should initiate the agendas. Board members are not obliged to tag along behind management. They need not become superstaff. Yet tradition encourages boards to derive their agendas from staff-based divisions of work. This is the superstaff trap. Carver argues the “new wisdom” is that boards group their work not from staff administration but from:
- Ends to be achieved: what human needs are to be satisfied, for whom, at what cost?
- Means to those ends: “The board’s only interest in staff means is that they be effective, prudent, and ethical. I have never found any other legitimate reason to interfere with a subordinate’s means.”
- Board-staff relationships: how power is passed to the executive machinery and how use of that power is assessed.
- The process of governance: how the board represents ownership and provides strategic leadership.
Policymaking always takes place, even though invisible, unarticulated, and not written down. There is never a lack of policy. Policymaking should replace approval of staff work as the dominant board style of leadership. These are Carver’s elements of policymaking:
- Policies must be explicit, i.e. written. “Everyone understands” until policy is committed to writing; then we realize it isn’t as precise as we had assumed.
- Policies must be current. Up-to-date policies are the only ones that work.
- Policies must be literal—must mean what they say.
- Policies must be available in a central convenient place. Policies should be virtually the only medium through which the board speaks.
- Policies must be brief. Brevity is the unheralded secret of success. (Carver has yet to master brevity.) As Polonius counseled Prince Hamlet, “Brevity is the soul of wit.” Brevity makes policies much easier to change and update. (These notes would be briefer if I had the time.)
- Policies must be comprehensive; they should encompass all that is governed by the board.
- Policies must be specific. “No matter how broad a policy is, it is always more specific than if it had not been said, and less specific than it might have been.”
- Policies come in sizes, like nesting bowls, smaller inside larger. A board can limit its work by attending to the largest first.
Memorize this: There are four categories of board policies:
- Executive Limitations
- Board Process
- Board-Executive Relationships
When the board completes its policies on Ends and Executive Limitations, management can be entrusted to make all further choices.
- The board should deal with all of the broadest/largest policy issues before dealing with the smaller issues in any category.
- Never skip any levels to provide “instant fixes.” When the board completes its policies on Ends and Executive Limitations, management can be entrusted to make all further choices. Ends and Executive Limitations are binding directives. But within those bounds, the CEO is free to choose and move without board interference. “Noses in, fingers out.”
- Prerogatives involving Board Process and Board-Executive Relationship can be given to the board chair. These elements deal with the board’s own “means” and shouldn’t be delegated to the CEO.
- Everything below the board is the CEO’s domain. “Noses in, fingers out.”
- There should be a board policy manual and a board budget; a board policy on compensation and a board policy on the treatment of personnel. One page should suffice in each case.
- The “approval syndrome” is created when management submits long and complicated “staff policies” for board approval. This is, unfortunately, the norm. It is a flawed practice because:
- It makes the board reactive; it has little choice but to approve or nitpick. Reactivity isn’t leadership.
- The sheer volume of low level issues diverts the board’s time, energy and attention.
- Attention to low level issues distracts the board from high level ends.
- It takes the CEO off the hook.
- Most of this material is short term in nature—not strategic.
- Mere approval creates ambiguity about what board approval means.
- It is a mere imitation of leadership.
- Board policies, however brief, become the parent of all executive action.
- Ultimately, no board activity takes place without reference to policy.
- Policy development is the board’s chief occupation.
- The responsibility for policy rests solely with the board itself. This responsibility must not be delegated.
Board Process. Creating policy is the perpetual work of a board, deserving a majority of its time and interest. The organization’s only justification for existence is worthwhile results in satisfying human needs.
The most insidious threat to boards is internal issues—fiscal, personnel, logistical, or organizational. Leadership for effectiveness begins outside the organization, outside the seductive intrigue of internal organizational activity. The organization exists to make a difference in the outside world. This is the organization’s “swap” with the world:
- Is the world richer, happier, less in pain because of the organization?
- Is the world poorer, unhappier, more in pain because of the talent, space and capital consumed by the organization?
- Hence, board policymaking must constantly ask:
- What good are we accomplishing?
- For whom?
- At what cost?
Boards confuse means with ends. Seductive means include:
- Commendable activities: well-intended activities, busyness instead of results.
- Commendable conditions: training programs, high morale, paying staff for credentials instead of results.
- Commendable structure: effective CEO utilization of staff rather than results.
- Commendable technology.
Activities are always means, no matter how complex or important. External outcomes, results, and impacts are ends, whether or not they are parts of a broader end.
Instead of a Mission Statement, Carver suggests a “Difference Statement” or Ends Statement focusing on the difference the organization intends to make in people’s lives. “What is the organization for? How will the world be different as a result of our being in business?” An Ends Statement would have six characteristics:
- Results terminology not couched in activities necessary to effect change.
- Succinctness: a few words; no more than a sentence.
- Board origin: not simply ratification of CEO or staff proposals
- Development by a board accountable to ownership
- Ubiquity: it appears everywhere, on all documents, bulletin boards, etc.
- It’s the theme and backbone down through the organization to its lowest levels.
Some examples: “A community free from poverty”; “every child a wanted child”.
The Board’s Role in Long Range Planning. Expand on the Ends Statement with the broadest Ends Policies segmented for easy amendment. The “nest of bowls” approach. (See below for more detail.) Creating Ends policies with a long-range perspective is the greatest contribution to long-range planning a board can make. Thereafter, except for planning the improvement of its own governance, a board should not do the actual long-range planning. That’s for management. Long range planning stretches staff upward towards the board’s long-term vision. In the process, all grow a little. The board should demonstrate a long range mentality about what is to be accomplished, for whose benefit, and at what cost.
Evaluating ends is not a “how” question, but a “what” question. Boards can get caught up in evaluating means because they are more easily seen and counted.
- You get not what you inspect, but what you expect. Measuring the wrong things sends the wrong message.
- The pressure and embarrassment of having no stated outcomes can begin the evaluation process.
- Evaluating ends simply asks, “What is the most convincing evidence that we are getting what we want?” A crude measure of the right thing beats a precise measure of the wrong thing. Most non-profit evaluations are extremely crude ways of asking how the public judges the organization’s worth.
Setting Executive Limitations on means is the second function of a board. Among the areas tempting boards to get into staff business are:
- Supply and purchasing
- Accounting and forecasting
- Risk management
- Consumer record keeping
- Management methods.
Board activity in these areas should be “fingers out.” These are staff issues. They shouldn’t be elevated to board issues. They are all means. A subtle trap for an unwary board is “approvals” of staff actions. Most of these deal with means. The board should not substitute its judgment about how the staff does its work, except to set limitations on staff conduct—i.e. executive limitations. Most of these limitations involve prudence and ethics. As to executive means, the board should remain silent except to state clearly what it will not put up with. This is always best done ahead of time.
Thus the total message a board sends to staff consists of what it wants achieved (Ends) and what may not be done in the process of achievement (Executive Limitations.) Define the boundaries and let the staff figure out the best way to do the job within those boundaries. As long as the board-stated Ends are accomplished and the board-stated Executive Limitations are not violated, staff action is by definition supported by the board.
In approaching Executive Limitations:
- The first position is “The CEO may neither cause nor allow any organizational practice that is imprudent or unethical”.
- Never leave a board policy vacuum.
- A good beginning point on executive limitations is to list the boards “worry areas.” The most common “worry areas” are:
- Financial condition
- Asset protection
Typical executive limitations require fair treatment of vendors, unacceptable risk of assets, limits on incurring debt, unacceptable budget practices, limits on spending from funded reserves, limitations on growth, out-of-bounds on compensation and benefits. Otherwise, the CEO is to “go until we say stop” not “stop until we say go.” Most boards end up with ten or fewer executive limitation policies, each less than a page in length. There are helpful examples in Carver’s book. No matter how carefully written, there will always be room for interpretation. Interpretation is the CEO’s job. The board cheats its mission by constraining too much, but cheats its standards of acceptable conduct by restraining too little.
Board-executive relationships. Most non-profits have problems because they either overpower or underpower their CEOs thereby inviting them either to become Milquetoasts or manipulators. Most are best served if the CEO does not act as board chair. The CEO’s only accountability is to the board, not to individual officers of the board. If the CEO must get approval of the board chair, then the latter is really CEO.
Each employee is accountable for board policy, but the burden of accountability increases as we go up the organizational ladder. The board has only one employee, the CEO. The CEO has all the rest. The board has no official connection with staff except at the CEO’s behest. The CEO’s working job description is for him/her to decide; it is not to be used in evaluating performance. Individual board members and the CEO are colleagues. There is no reporting relationship except to the board as a whole. The board can never judge or evaluate staff performance—that’s the CEO’s province.
Monitoring CEO should be predicated on pre-determined criteria, not after the fact. Yet it is easier to shoot down what you don’t like than to declare what you want at the outset. Sources of information include the CEOs report, external audit and on occasion direct inspections. Common mistakes include unstated expectations, generic personnel evaluation forms, and benchmarking the CEOs own personal objectives. It’s preferable for the CEO not to buck executive decisions to the board, and not to assist the board in governance decisions.
The board’s responsibility for itself. The third and fourth elements, board process and board-executive relations, are the board’s own policies that govern itself. The board is the “moral owner” of the organization. The funding source is not the moral owner. The board is fiduciary for the persons served by the organization. The board’s obligation as owner supercedes its obligation to the staff. Intense identification with staff detracts from being trusteeship driven.
The board is responsible for its own development, job design, and discipline. “Being warm and willing to attend meetings, inclined to donate money, and interested in the organizational subject mater do not constitute responsible board membership. Designing a sound board process before the process becomes personalized is the best safeguard against unfortunate board interpersonal dynamics. Renaissance board members cannot compensate for inadequate board governance process.
Dealing with dysfunctional board members is much less difficult if the board has previously determined appropriate behavior for board members. Overpoliteness and power-based confrontation; both spring from valuing personal aspects more than issues. Board members expect too much of the chair when he/she is asked to save the board from being held hostage by its most controlling member.
- The board’s first direct product is to determine its link to ownership.
- Its second direct product is explicit governing policies re: Ends, Executive Limitation, Board Process and Board-Executive Relationship.
- The third direct product is assurance of executive performance.
These three are non-delegable and unique responsibilities of the board.
- Fundraising may be a fourth board product: it may be a legitimate board product, but more important is having an organization worth raising funds for.
- Legislative impact (lobbying) may be a fifth.
Officers and Committees. The board must speak with a single voice—a unitary board. If it does, no individual board member can speak for it with the CEO or staff. Conversely, the CEO must answer to the board as a whole, not to the chair or other individual member. “We will deliberate with many voices but govern with one.”
A CEO cannot be obligated to acquiesce to the chair alone, or work both for the board and the chair. Watch the office of board treasurer—it may conflict with the CFO of the organization. Board treasurers are obsolete and interrupt the flow of financial information from the CEO.
No common practice so threatens board wholeness as the traditional approach to committee work. Most boards rubber stamp the work of their committees. Wholeness is lost. There is no reason for boards to form committees in categories that are appropriate to administration. Where boards create committees with titles that duplicate staff functions, those committees can be expected to drift into staff work. What do staff members do with board committee recommendations? Such advice is suspect. Advice should be totally within the control of those who receive it. Board advice can be interpreted as subtle orders, and staff performance judged on the basis of how such advice is carried out. Board committees should engage staff only for the purpose of obtaining information.
- A board with a CEO is never justified in forming its own personnel committee.
- Executive committees tend to become the “real” board within a board, creating an inside-outside relationship that threatens wholeness. A board reduced to manageable size doesn’t need an executive committee. Executive committees tend to make or approve executive decisions that should be left to the CEO, assume prerogatives that should be left to the whole board, and sometimes both. Establishing executive committees to make decisions between board meetings countermand proper delegation and proactivity. Program committees can be dropped.
- Finance committees have no place to go but to staff. They duplicate staff functions. (If fundraising is a board function, a finance committee may be useful for that limited purpose.)
- A board nominating committee serves a very useful function in maintaining the integrity of board process—perhaps it’s most important and legitimate committee.
Ground rules for developing policy. The board can invite anyone to participate in this task, but only the board will vote. As the board creates policy it should focus primarily on decision information.
Its policies cover the four primary categories:
- Executive Limitations,
- Board Process, and
- Board-Executive Relationships.
No policy should fall outside these categories, or cross them. Any single governance issue should be in only one category.
Proceed top-down. Write a single sentence preamble, and then descend from broader to more narrow issues. This is the “nesting bowls” analogy. Written down, proceed in outline form:
1. Ends. Sample preamble sentence: “The mission of the Hope Cancer Fund is a world with sufficient knowledge for the radical reduction of death by cancer.”
2. Executive Limitations. Sample preamble sentence. “The CEO shall not cause or allow any practice, organizational circumstance, acidity or decision that is either imprudent or in violation of commonly accepted business and professional ethics.”
3. Board Process. Sample preamble sentence: “On behalf of the total community, the board will govern with one voice through written policies with an emphasis on long-term Ends.”
4. Board-Executive Relations. Sample preamble sentence: “All board authority delegated to the operational organization is delegated through the chief executive officer so that all authority and accountability for the operational organization is considered to belong to the CEO.”
A board can delay changing a policy, but it cannot delay having one!
Making Meetings Work. Board time is extremely limited and rationed. Talking time must be carefully managed. Screening a proposed agenda, ask:
- In what category does this matter belong? Ends, Executive Limitations, etc.
- Whose issue is it? The board’s, the CEO’s, other staff?
- What has the board already said about this?
- How can this issue be disposed of under prior board determinations of policy?
Sometimes legal requirements require certain board actions: e.g. approvals of staff work—that can and should be rubber stamped. This can be handled as a consent agenda. But don’t rubber stamp to coddle executive indecisiveness.
- Don’t abdicate the agenda to the CEO—the agenda will become his/hers instead of the board’s.
- Plan agendas one year at a time to avoid last minute approvals caused by immediate stressors.
- Dialogue with other boards. Seek answers without executive ventriloquism.
- Use Ends to justify board meetings.
- At least annually, ask the board how it can connect better with the persons the organization serves; and, given new input (information, wisdom, possibilities) what good for which people should we strive to do in the ensuing year?
Getting from Here to There.
- Converting an existing board to Carver’s design model may require a year to accomplish.
- Boards will stumble in the process.
- When accomplished, the board’s time will be spent largely on creating the future.
- At the outset, the board will find that most existing policies are staff policies improperly elevated to board policies. After obtaining commitment from the board,
- Carver recommends the following sequence:
- Executive Limitations: begin with “worry areas” e.g. budget, risk, personnel
- Board Process: design the board’s job description and how it does its work.
- Board-Executive Relationship: establish the ground rules of delegation and CEO function
- Ends: deal with these last. Practice on other areas first. The current Ends remain in place until the board changes them. Once the board starts ends policies, it will remain there forever. Ends policies are the board’s perpetual engagement.
Redefining Excellence in Governance.
Carver’s suggestions seem quite compelling. They may be easier to implement with new boards, than with older ones. The boards on which I have and do serve have violated most of Carver’s rules.
- Become obsessed with the organization’s effect on the people it serves and at what cost i.e.: Ends.
- Don’t ponder Ends, attack them. Ends are the most exciting topics.
- Don’t become obsessed by cost control.
- Demand daring.
- Keep trusteeship up front.
- Don’t get hung up on avoiding errors—this creates followers.
- Create breakthroughs—these create leaders. Leading leaders requires tolerating risk; otherwise the organization stays in the same old ruts.
- View governance as empowerment towards something definitive.
- Respect words. Most non-profit boards get nervous when their total official paperwork increases beyond fifty pages. Reduce all possible duplication. A greater volume of words makes the board’s values less clear. View every proposed action against the background of what the board has already done.
- Recruit new board members who will and can govern. Finding the right people is infinitely more important than filling vacancies. Guides to recruiting:
- Commitment to “ownership” and the organization’s specific mission
- Thought processes in terms of systems and context.
- Ability and eagerness to deal with values, vision and the long term.
- Ability to participate assertively in deliberations.
- Willingness to delegate, to allow others to make decisions.
- If fewer than half of the board’s members would make good chairpersons, the selection process needs improvement.
—Gerald Le Van