Abolish the nonprofit board? What do you think?
Last Thursday I was part of one of the most provocative discussions I’ve been in for awhile.
The CEO of a year old start up public charity — I’d say he fit the description of a “social entrepreneur” — was describing his leadership and management framework to a group of top level corporate types. He was confident, brash, passionate about his mission, and business oriented. He referenced Jim Collins and Good to Great in his approach.
The business people loved him. Me too… until…
He explained how in starting this new organization he had learned many lessons from the previous organization he had founded (which had enjoyed both great program outcomes and growth).
- Like the need for a clear business model
- The importance of having great people in their jobs
- A commitment to the mission, including not settling for too small an impact on a big problem
All good, and then..
- Getting rid of unproductive time sinks, including the Board of Directors.
Whoa! Like throwing a firebomb into the room.
Hearing the collective gasp, he went on to explain. At the first organization he had founded, he spent 30% or more of his time managing the Board of Directors. A board that was complacent with the number of kids they were serving, which was barely a drop in the bucket of need.
So, this time around, he wasn’t going to waste precious time when there was important work to be done. Though he really couldn’t really abolish the Board (state law does require a board of directors for a nonprofit, usually with more than one trustee), he could make it small and manageable. Which he did by composing the board with two good friends and himself.
I noted that this is all perfectly legal. And frequently done. Think of the typical founder board, usually a family and friend affair.
Needless to say, lots of questions followed:
Don’t you need the Board to assist in fundraising? No, the business model is built on federal funds.
Who decides Executive Compensation? How do you ensure that you don’t get in trouble with the IRS over excess compensation? We do an regular market survey of salaries, I get paid under the top, and I recuse myself from the discussion and vote.
How do you build community ownership? Get contrary advice? We have an advisory board of community leaders and others.
Why didn’t you just create a for profit organization? Because this is the corporate structure I’m most familiar with and to leave open the possibility for philanthropy, even though the business model doesn’t currently depend on it.
What happens if something happens to you? That is a question, but my guess is that the board will find someone to replace me. Plus, as we grow, there will be staff under me who could step into my shoes.
I had lot of thoughts about this. But before I share them, I’d love to hear from you.
What do you think? A good idea or not?
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I love it from an efficiency standpoint, although perhaps from an efficiency standpoint the issue isn’t so much as dumbing down the board as it is learning how to more efficiently manage the board? (question mark intended)
As an insurance agent who works predominantly with nonprofits and for profit social service organizations, I have to say that this model makes me a little nervous. If I were an underwriter and knew that this was the outlook of the executive director, I’d want some additional information about the advisory board of community leaders to confirm accountability.
AS with for profit entrepeneurs, I know nonprofit entrepreneurs aren’t so concerned how their decisions affect their liability coverages. They just need to expect slightly higher premiums or have more intrusive underwriting questions if they follow this type of model.
The Directors and Officers Liability and Crime/Employee Dishonesty coverages might be hit the hardest.
Sorry, but he lost my support with this model by stating his org is built entirely on federal funding. As a grant writer, I know all too well how fickle grant funding can be. Never put all of your fund raising eggs in one basket!
Having dealt with “good” and “mediocre” boards before, I can empathize with the speaker. In general, I think smaller boards are more effective because they tend to more engaged. I do think boards are important, to keep staff honest, to br…ing in new opportunities and to explore ideas from a variety of angles. While I often found myself “managing” the board for mundane things, they also kept me on my toes and asked really provocative questions that made my organization strong (and strengthened me as a leader). However, I think the most important thing a board (is supposed to do) does, is provide fiscal oversight of donated funds (regardless of whether they come from federal grants or individual donors or what have you). As a donor, I would look askance at donating to organizations that don’t have this oversight.
From the way you tell the story, it sounds like he might have skipped over Collin’s chapter on Level 5 leadership.
Gayle:
I have lots of thoughts, as I’m sure you might imagine.
🙂
My most direct thought is that the reason Mr. Founder feels boards are not worth the hassle is because he failed in building an effective board at his past organization, and rationalized that by blaming the board. My guess is his go-it-alone attitude may have been among the contributing factors as to why that board was disengaged!
All the other reasons aside, and building off what Betsy said, without a board, if something happens either to the founder or to his funding (or both), the mission and what good it has the potential to accomplish are both gone.
Except in dire circumstances, it is rarely a good idea to give up long term effectiveness for short term expediency. This may make Mr. Founder’s job easier in the short term, but it does not bode well for the organization’s long term ability to serve the community.
HG
Oh wow, how provocative. Here’s his point: nonprofit board members can take up an obscene amount of time, as one ED so colorfully put it recently. And do-nothing boards can be a huge drag on a socially entrepreneurial nonprofit hell-bent on changing the world.
But I do agree with Hildy that he clearly didn’t work to build a decent board in his last venture. And his go-it-alone attitude would sure drive me off the board.
There’s gotta be a solution somewhere in between. Gotta have a board to keep your organization clean, legal and credible. And you end up getting the boards that you deserve. So if you put the time in – you’ll have a valuable asset on the other side.
Trouble is – too many nonprofits don’t understand how to build an effective board. Or if they do understand, then they don’t execute.
I like Betsy’s analogy of “all your eggs in one basket”, and that extends further than funding.
Sounds like Mr. Founder didn’t leverage his board in the past. There is so much to be gained from a board, even the most average board and leaving those assets off the table is short sighted (as mentioned).
I’d suggest Mr. Founder has limited his options for future growth with his model. However, you have to applaud someone who is willing to start the conversation on a model that has seemingly many holes. Perhaps there are plugs that can fit into all those holes or maybe I just want to cheer for the underdog occasionally 🙂
I have seen great boards and less than great boards and that reminds me how someone could be compelled to come up with a model that removes the board element rather than coming up with a strategy to create a great board.
I wish Mr. Founder the best of luck as he tweaks his model.
Great issue! Sounds like my esteemed colleagues have raised some good points already. I think a board of 3 (Founder and 2 friends) is too small and risky. If 1 friend needs to resign for whatever reason, you just lost 30% of your institutional knowledge. I think a bigger board of maybe 6 people could accomplish the same thing (being manageable and productive) while spreading the work out over more folks.
Sandy Rees
Fundraising Coach
I think this model is well worth exploring but I agree that this particular model has holes. In terms of boards keeping NPOs “clean and legal”…well we’ve all read the headlines about boards big and small that don’t keep up their end of the bargain here. I’ve done a lot of work in the world of public radio. Many are licensed to universities and technically the board of the university oversees them – which means they don’t really have boards. They do, however, have advisory committees which help with outreach or other special projects. I don’t know what the answer is but I do know that boards are a thorn in the side of 90% of the non-profits I work with. I think its time to rethink this model. Perhaps it’s outdated.