On boards

As a public administration grad student, I’ve been thinking a fair amount about nonprofit boards of directors lately. I’m not the first person to think that nonprofit boards can be super-dysfunctional; there’s a whole industry of “self-help” books for boards. (The one I’ve most enjoyed lately is Governance as Leadership: Reframing the Work of Nonprofit Boards, if you’re looking for some bedtime reading.)  But the roots of board dysfunction are not to be found in some sort of failure to implement “best practices,” though. There are deeper problems with the institution of the board itself, and I’ve rarely seen these talked about.

Most of the time nonprofit boards work just fine, because there is nothing difficult they need to do. Sometimes, though, boards have to do urgent, important, difficult work–like an executive director transition–and that’s when they can get into big trouble.

The hard truth is that nonprofit boards have almost zero accountability for performance beyond meeting the bare minimum legal standards of “don’t steal the money or let it be stolen.”

  • Board members have no financial assets at stake, unless they also happen to be major donors–and that is all sunk cost anyway. And of course, nonprofit board members are typically unpaid. So there’s no economic incentive.
  • Board members have no real professional reputation at stake, and will typically experience no or few negative consequences even if they destroy the organization through mismanagement.
  • Most boards aren’t elected by a membership, and when they are, the elections are rarely competitive. So, pseudo-democratic accountability is rarely a factor, and weak at best.
  • Much of the time, board members don’t have strong enough relationships with each other to effective hold each other accountable for high performance. How many boards do you know of where the members are close collaborators or, god forbid, friends, outside the boardroom?

To be sure, board members have their own consciences to guide them, and for many boards, that is enough to carry them through the good times and even the slightly rocky times. But when the going gets really tough–as it sometimes does–it is far easier for board members to avert their eyes, pull away and even just resign rather than to “lean into the messy” and grapple with the really tough questions of organizational identity, executive performance, and leadership. There are few rewards for high performance, and fewer disincentives for low performance.

If that’s not bad enough, consider that the number of nonprofits in the US continues to grow rapidly–from 2001 to 2011, the number of nonprofits increased by 25% to over 1.5 million. More nonprofits means more board seats to fill, and last I checked, good board members were hard to find. (Proof? Name an E.D. you know who is turning away highly qualified board candidates.) At what point have we created more board seats than we can fill with talented, motivated people? Is this contributing to the phenomenon of low-performing boards that I describe above? How would we know?

2 thoughts on “On boards”

  1. Jon – I agree. How would you characterize the difference though, with a for profit board? Although I haven’t served on one, the literature (look at Hewlett Packard for a recent example, or any of our banks) shows that despite compensation, elections, incentive and reputation – they often do horribly damaging work.

    What do you think? Is this a fair comparison? As you know, I’ve only recently moved from the nonprofit to the for profit sector – and while budgets are bigger – I see a similar ratio of incompetence/lack of experience/leadership gap.

  2. Patrick, great question. Honestly, I don’t feel that I know enough about for-profit boards to make any reasonable generalizations. I would imagine that at least some of them may well exhibit some of these characteristics. However, I do think that publicly traded companies have several factors that may at least partially mitigate the particular dysfunctions I describe: 1) Many large-corp board members are paid or have other direct financial interests in the well-being of the corporation (or at least in its share price). 2) Large company directors are at least theoretically elected by the shareholders. For-profit corporate governance is surely dysfunctional in many other ways, though.

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