The Importance of Momentum: a Problem for Boards

 Momentum, (and maintaining it), is infrequently mentioned in discussions concerning leaders; (however, Jim Collins discussed it in Good to Great in terms of spinning a fly-wheel and accelerating it). And, Brian Tracy in his little but powerful book, Eat That Frog, stresses not only initiative (a bias for action), but the importance of sustaining momentum once one has started on an initiative, this to sustain the discipline and energy required to complete what you have tackled. 

I wholeheartedly agree. I immediately saw especially the difficulty for boards. Repeatedly I have seen boards get concerned about the need for an action or excited about getting governance training, such as being trained in Policy Governance, developing much needed policies, or improved dynamic, only to procrastinate the action or the training. A board elects to be oriented or receive introductory training and then does nothing—no decisions, no calendar, no deadlines, no action, nothing. This kills momentum and kills the energy of the initial start. This phenomenon applies as well to tough decisions, e.g., dealing with a CEO or a financial issue—putting it off...and off, ...(perhaps "until I’m off the board" (or out of Congress)).

To solve this, I’m convinced the board needs to vote intent immediately while it has energy and a sense of urgency—and clearly express its intent. Boards are very susceptible to loss of momentum. Time kills one’s sense of urgency. Boards meet infrequently. Procrastination of a decision, any decision, diminishes the sense of urgency that originally triggered it. (This is true personally as well.) An opponent of a proposal on staff or on the board, the CEO, or the Chair, who does not want action will sometimes urge delay for just that reason—slow the staff or board down and maybe they’ll forget about it (he hopes); the sense of urgency will dissipate and the board will return to its normal reactive passivity. By the way, this procrastination is different than taking time to understand and reflect. If that is needed—do it…and maintain the momentum! Set the next step, the date due, and the person or committee accountable.

Board member turnover worsens this dynamic. The new member(s) comes with no history, no commitment and no sense of urgency.

Consequently, the role of the chair (or a team “captain” playing whip) is vital. A passive and lazy chair is death to effective governance.

(Published on website 1/14/13)

RMB

Accountability of the Board and Knowing the Organization’s Increasing Risk

 In our last blog we talked about collective accountability and the difficulty boards have recognizing it. In a past opinion, the Chancellery (corporations) Court of Delaware has found that boards have a “higher accountability” as the organization approaches a high risk zone, e.g., the “zone of insolvency,” (i.e., is getting dangerously close to insolvency). I would slightly modify the court’s choice of words only to point out that it is not it’s accountability, per se, that changes, since it has always had the accountability, (which doesn’t change), but it’s duty and responsibility of heightened attentiveness and rigor of caution to what monitoring is revealing and the board's duty for action. 

Unfortunately, nonprofit and ministry boards, especially, are notorious for ignoring danger signals, or if they recognize them, hoping they will go away or fix themselves and that the executive director will change the present course of fiscal disaster. This is especially true if the executive director is founder or long term. The board’s loyalty and desire to be “nice” rather than tough, mitigates their joint sense of accountability toward maintaining a healthy organization. Board members individually know the organization is headed toward trouble and privately feel the “board should do something” but have dissociated themselves from the urgency for action the accountability should produce. 

(Originally posted on our website 1/7/13)

RMB

The Challenge (and Danger) of Collective Accountability

 Recently a judge in New York has found a way to accomplish something that is normally difficult to impress upon board members. “Joint accountability” is a term used to apply to groups such as boards that are collectively accountable with each person carrying the same accountability as all others on the board. They all share in the same accountability. Unfortunately, this is a difficult concept to reify for a group—that of mutually shared accountability. Patrick Lencioni addresses it in his book, The Five Dysfunctions of a Team, explaining that without it, team effectiveness is mitigated. Shared accountability, in turn, says Lencioni, depends on commitment (by each member). Nevertheless, several elements found frequently in board governance diminish the sense of shared accountability, size (too big), poor attendance, hiding, failure to individually engage, e.g., to participate, or abstaining when voting, not owning board decisions once made, etc.

In the Dec. 10^th NY Times was a story of the board of a nonprofit charity that rents affordable housing to students. The board members were fined roughly $1 million each for “stunning” negligence by “breaching” the duties of loyalty and care in permitting the organization to engage in fraud via inurement—self-dealing with a corporation owned by the NP’s executive director. In spite of the fact that the ED mislead the board, the court held that they had a duty to monitor organizational transactions to assure avoidance of conflict of interest and fraudulent inurement. Trustees also had, themselves, some individual “consulting contracts” with the organization, which perhaps helped blind them to other forms of perfidy.

Accountability is real. However, when society invented the board as a means to oversee corporations about 500 years ago it introduced a group dynamic that, by its nature, often impairs a member’s individual personal sense of accountability for the quality of shared governance. This judge found one solution!

(Originally post on our website 1/2/2013)

RMB

Pastor also Deemed CEO by IRS, Consequently subject to fine

In structuring church governance it is very difficult to avoid including the CEO role (of the church as an incorporated organization) as intrinsically within that of being the pastor, since all staff are generally appointed by and report to him. This defacto dual role of the pastor brings sobering liability as illustrated by the IRS case below, upheld by the Federal District Court.

 “A federal District Court in North Carolina has affirmed a Bankruptcy Court decision holding that the founder and “Chief Apostle” of a church, who had the powers of president and CEO of the corporation, is personally liable for payment of withholding taxes for church employees when the church failed to remit the amounts due.  The Court has rejected a claim that an interpretation of her powers, based in part on a reading of the church’s bylaws, violated the Apostle’s and the church’s rights under the First Amendment of the U.S. Constitution. (Vaughan v. Internal Revenue Service, E.D. NC, No. 4:11-CV-222, 7/16/12.) (From NP Issues news page Oct-Nov. 2012)

I consistently argue that a vigilant (and diligent) governing body, elders or otherwise, is the best protection a pastor can have. But oversight diligence has to be via a set of articulated principles by which the church is run, i.e. called policies—covering all areas of risk to which the church is subject.

RMB

Reacting to the HBR Article - Oct. 2012 - the Rise of Big Data and the implications for Nonprofit and Ministry Leadership

I was visiting with a friend who chairs a nonprofit ministry board, and her board wants to understand how the organization is doing in terms of accomplishing its purpose and to assess its strategy. This is an increasing expectation of nonprofit boards. This means that the senior leadership team will have to figure out how to measure its progress toward the desired outcomes, impacting and changing lives, and that is not just counting client encounters! Or some event-based “dashboard.” It will call for a thoughtful approach, even inventiveness, in metrics and analysis.  

The series of articles in this past Oct. issue of the Harvard Business Review reminded me again of an often overlooked KSC (knowledge, skill, and/or competency) needed by senior executive leaders, that of metrology. We are (usually) quick to acknowledge the need for financial understanding by a chief executive to at least the level needed to engage in the financial leadership of their organization, but the lists I see by writers on leadership rarely mention any need for an adequate understanding of numbers, measurement, and interpreting their relationships (metrology). The HBR articles reminded me that the growing complexity of the organizational world, including the nonprofit world, will increasingly require leaders to grasp numbers and analysis sufficiently to make sense of the sea of data available and to then lead their organizations into improving the understanding and insight they will need to form shrewd strategy in these complex days. 

The same demands are occurring on the donor side. Nonprofits are looking for ways to understand their donors and the shifting topography of donor landscape, especially their donor landscape. There is much available in customer analytics but less regarding donor analytics, a much less tangible area to operate in.

All this adds up (especially when you throw in financial data) to an executive leadership that must become sufficiently analytics savvy to effectively and strategically lead.

(Originally posted on our website 12/18/12)

RMB

What Does the Ford Fusion Have to do with Governance?

Well, Ford Motor Company has done it again. The 2013 Fusion was named Green Car of the Year by the Green Car Journal. To me this represents the results of a process that Toyota calls kata or another variation on kaisen — persistent continuous improvement—finding your way into a better and better future product through small continuous increments, learning as you go.

What does this have to do with leadership? With good leadership—Everything. Ford, once discovering continuous improvement as the process toward excellence in the future, stayed the course for 15 or more years now. That takes determined and knowledgeable leadership. GM was herky jerky regarding CQI, on and off, and it proved seriously damaging. They were the one, along with Chrysler, who needed a Federal rescue and a remake. Ford did not, even through the toughest of times.

Excellent leaders seek excellence, if not perfection (think of Steve Jobs for all his distractions as a personality—he gave Apple a culture of perfection to the absolute extent possible). And seeking excellence takes a long view.

Strangely, governing boards, who would never tell their managements not to seek excellence, don’t seek it themselves in their own governance. I commonly hear the old saw, “Well, I believe if it isn’t broke, don’t fix it,” from board members who are perfectly happy doing what they have been doing for decades.

There are three areas that boards need to continuously seek the most effective way, the structure, or shape, of the governance (size, committees, membership, input structures, officers, dates and times, etc.), the process the board uses to achieve creation of the governing "products" (decisions, policies etc.), and the dynamic of the board (its manner of conversing and decision-making). All three must be optimized. This takes persistent learning and diligence, not something the average board is used to being or doing.

(This was originally posted on our website Dec. 10, 2012)

RMB

Constraining Expenses: The Bain of Organizations

 I currently sit on three nonprofit ministry boards. Two of the three (and their chief executives) struggle with constraining expenses within declining revenue. But, after watching the behavior these days of for-profits, I’m also concluding that even for-profit organizations have a hard time addressing and reigning in costs, especially as revenue drops. John Seddon, the UK consultant and writer on systems thinking and lean management, says that focusing on costs will invariably result in increased costs. Focusing on excellence in customer service (and what the customer wants and needs) will result in lower costs, sometimes dramatically lower costs as well as the likelihood of increased revenue. It is much easier for us executives to work on planning to increase revenue. (Although this may be an exercise in hope rather than strategy.) What Toyota did over 50 years is amazing since its focus was Kata - constant process improvement to improve product value while doggedly removing unnecessary cost (“waste”) - creating a entire culture of workers motivated and skilled at that while never losing sight of the customer.

Not-for-profits (except perhaps health care) are generally not as customer focused (in terms of “product” satisfaction) and usually are much more revenue focused, paying little attention to cost management and unable to cut costs even, in many cases, with disaster staring them in the face.

They and their boards attend development and fund raising seminars and training and rarely courses on better, tighter management or financial leadership, rationalizing their actions in spiritual or ideal terms. In ministries, since it is the Lord’s work, He’ll provide - on the revenue side. I’ve never heard a prayer for wisdom on how to cut back. (Though I trust such have been offered somewhere.)

Cost management takes a completely different mind-set or attitude - lean thinking, being creative, going against conventional wisdom, reconstructing processes, etc. This is true in spades for educators.

(Originally posted on our website Dec. 4, 2012)

RMB

On Leadership, a Slippery Idea

    

 I read a lot on leadership (since board governance is a form of leadership). I am struck by the number of authors who try to pin it down to a few, (e.g., Kouzes and Pozner)—or many attributes. (John Maxwell comes to mind). The numbers of ways people find to dice up leadership boggles my mind …and confuses. It ranges from such terms as “influence” (not helpful—too broad) to three or five items such as in Kouzes and Posner’s “Five Principles,” to Maxwell’s 21, to … 

That should tip us off that leadership is one of those abilities we recognize when we see it, but trying to get a net around it is another issue. Yet academics and consultants keep trying.

I would tend to describe “leadership” as a constellation of attributes that equips and enables one to align and influence others to move in the direction desired by the leader. Somehow successful movement toward an objective should also be a criterion, since (successful) strategic thinking is considered a vital attribute of leadership. And leadership is definitely situational. Successful leadership in combat does not (necessarily) translate to successful leadership in a nonprofit ministry but, nonetheless, shares several attributes. Note, this “definition” so far is value neutral. Good leadership adds virtue and values. I would also add wisdom, as Biblically defined - thinking well is inextricably intertwined with rectitude. So a good leader is virtuous and wise as well as possessing a host of value-neutral attributes enabling aligned, directional, successful influence.

Oh well. That is my first, or twentieth, shot at it. And I haven’t begun to touch the components of the attribute constellation.

(Originally posted on our website Nov. 26, 2012)
RMB

Penn State President indicted, a lesson in responsibility

Recently we all learned that the former Penn State President, Graham Spanier, has been indicted by a Pennsylvania grand jury for alleged crimes relating to the Sandusky sexual predator scandal with seven counts of various types, but essentially dealing with complicity in covering the crimes in various ways after the President’s office learned of the allegations. We learned from the State Attorney General that the cover up conspiracy cascaded itself up from the athletic director through a vice president (Financial and Business) to the President.

This illustrates our previous blog concerning the difference between accountability and responsibility. You generally can’t go to jail for your accountability (Spanier was accountable, under the board for the entire University), but you can go to jail for what you were personally responsible for (or for not doing), in this case failure to report, and actively covering and subsequent perjury.

The lesson? When something arrives on your desk you become responsible for it as well as accountable for it. If you hear of something going on that is illegal, immoral, imprudent, risky, you have a duty (responsibility) as part of your accountability to investigate, but your investigation also engages your responsibility. The old ostrich technique will not work.

Take a lesson. Executive leadership and governance is morally serious business. I wonder if the Board is nervous.

(Originally posted on website Nov. 19, 2012)

RMB

On Seeking Expertise as a Condition for Board Members and Training the Board Instead

Posted originally as note on a LinkedIn Policy Governance® thread, 7/12/12

 Boards often (usually?) have the idea that "you've got what you get" as board make-up, so they strive to appoint at least some, or even most, people with business competencies relevant to running the place. But Policy Governance boards must represent ownership (in a wise way) and so must look for people who are part of the broader ownership but who can rise to the conceptual challenge of creating and understanding great Ends and how they direct the organization - not necessarily financial statements or investment policies. This former approach creates a tension and the potential for boards to abrogate their decision-making and accountability concerning business-related polices and monitoring to the domain "experts" on the board. 

Over the years, after working with a big auditing firm (Capin and Crouse) and fellow consultants, we concluded we needed to change the paradigm concerning board member "expertise." - That, instead, boards, as a whole, seek and get sufficient training in the domains in which they need enough understanding to know whether the reasonable interpretations and data the board is getting meets reasonableness criteria and are satisfied by the supporting data. Management's monitoring reports should aid in this process but not enough. The IPGA workshop I did with Eric Craymer on risk governance stressed this point. The workshop that Sue Radwan did with Paul Siers at the Detroit IPGA Annual meeting on investment policy development had the same message.

A board, in its entirety, needs enough knowledge to know what it is talking about in its policies and understanding of the monitoring it receives. Yes, you can teach a mom to read a well done financial status monitoring report so she doesn't need to default her governance to the CPA on the board.

RMB

A Different Kind of Risk

(July 31,2012)

A Different Kind of Risk

In June of this year I presented, with a colleague, Eric Craymer, a workshop on risk governance at the International Policy Governance^® Association annual meeting in Detroit. We synthesized our experience and the recent risk governance literature and discussed it in the context of Policy Governance.

However, more recently as I reflected on my experience and studied the history of organizations of faith, particularly those alleging to be evangelical, I noted a class of rather serious risk unique to them—that of defecting their original fundamental beliefs, the most critical of which, I believe, is their high view of Scripture as inerrant. Experience shows that, for these organizations, abandoning inerrancy begins an inevitable and (nearly) irreversible slide away from all their previously held fundamental beliefs—typically toward more post-modern positions and usually pro-naturalistic science positions. Eventually their doctrinal statement will be changed, a pastor, or president and faculty  hired that is mixed or largely disbelieving in the institution’s original fundamentals, the original support base defects, and the products (such as graduates, if a college, and intellectual products) reflecting of the more liberal position.

How can such an institution or church prevent, detect, and deal with this very serious, even fatal, risk? What is the board’s role? Since the board is the highest and prevailing authority, possessing full accountability for the organization, it also holds accountability for sustaining the doctrinal stand of the organization!

Here is my quick list for a Policy Governance board. There may be other options as well.

1.)    Thoroughly understand the issues (doctrinal positions of the organization) and why they are considered important and the risks concerning them. Seek outside expert input from like-minded people (theologians, pastors, experienced presidents, etc). Many board members are business men or women, executives of other ministries, etc. and, while knowing and believing the components of the doctrinal statement as laypersons, will not understand them to the depth appropriate in a Bible college or seminary setting. If they are to govern an academic institution, they especially must have sufficiently deep understanding to assess a reasonable interpretation of their doctrinal policies.

    Church elders also (or other equivalent church officers) must include the study of their church’s doctrine as an important part of being a board member. Most lay elders or board members cannot detect error that may have crept into the church via a Bible study or Sunday School teaching, (or the pulpit). Strangely, even staff can hold differing views on key doctrines, such as soteriology, in the same church and the board be total oblivious!

2.)    Craft and/or modify the necessary board policies dealing with doctrine in sufficient detail to the point where “any reasonable interpretation” will be acceptable to the board. Note that in the area of doctrine and theology, words can be slippery and “work-arounds” by creative faculty, or a pastor, might be attempted in the future.

3.)    Carefully recruit and vet a president, executive director or pastor, one who enthusiastically endorses the position expressed in policy. Research the candidate’s past education, papers, articles, talks, and books, etc., besides the performance and references of the candidate. (Including any Ph.D. or Th.D. thesis).

4.)    Monitor the CEO (president, pastor, etc.) carefully initially. I know pastoral candidates that have lied to their board or search committee while secretly intending to change the doctrinal position of the church or institution. Consider the newly hired official to be “on probation” for a year and/or be prepared to terminate and have the spine to do it if necessary—quickly. Boards have the baffling capacity to overlook being lied to and not see it as a fundamental character issue in their CEO or pastor. (Otherwise, a power battle will develop, and the pastor has the advantage of the pulpit; the results will not be pretty and be very damaging to the church and to lives.)

5.)    Avoid short term service cycles for board members. Board memory is crucial.

6.)    Select board members with the same attention to the candidate’s doctrinal positions as given to the selection of the CEO or pastor and assure that he or she has sufficient understanding of the organization’s doctrinal statement.

7.)    Bylaw strategies: Make the doctrinal statement irrevocable and unchangeable, if possible, (this applies especially to churches with congregational control over the bylaws). Be advised, the problem with using this device is that, as a board learns more, or needs to address a particular attack on its doctrine, it may want to refine the doctrinal statement to improve its precision.

8.)    Have a bylaw provision permitting the elders (or equivalent board) to unilaterally terminate the pastor during the first year without requiring a congregational vote.

9.)    For a Christian college or university, a Policy Governance board must include some form of monitoring the classroom and the intellectual products of the faculty as part of data supporting compliance with policies concerning doctrine as well as the other board policies dealing with other institutional matters. Simply signing concurrence with the doctrinal statement is insufficient since faculty members can be very inventive with words and meaning, and in some environments are permitted to sign “with reservations.” In the higher education academic environment, academic freedom, an Enlightenment concept thought to facilitate truth-seeking and protect “intellectual integrity,” perhaps appropriate to secular higher learning, becomes an assumed rule also in faith institutions, and this eventually impedes or even prevents faculty products from being monitored for compliance if the institution permits this assumption to become a “rule.”

 Richard M. Biery, July 30, 2012