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

Hillary's Accountability

Well, Hillary did two weeks ago the same thing that Ken Lay did several years ago on Larry King Live. Mr. Lay was CEO and Chairman of the Board of Enron and was being interviewed by Larry King while he was under investigation and shortly before his indictment for his role in Enron’s fraud. Mr. Lay told King that he was “responsible for Enron,” and then a few minutes later stated that he was not responsible for Fastow and Skilling and what they had been doing regarding Enron’s trading and financial shenanigans. Larry King did what any of us would have done and reminded Lay that he had just said he was “responsible” for Enron, which should encompass the fiscal fraud. Lay had to extricate himself from that confusion.

 If Lay had said he was accountable for Enron but not responsible for Skilling, et al he would have been more accurate (perhaps; he was, after all, indicted).

But we all confuse the two concepts. Hillary did exactly the same thing as Lay last week when she took the blame for the Libyan Benghazi US Consulate attack by saying she was “responsible” for security or the lack of it.

Responsibility has a personal aspect to it; it is tied to what we personally do or not do.

Accountability is a collective idea associated with authority. We are accountable for what we have authority over. We cascade delegated responsibilities (duties) to individuals down through an organization. We give responsibilities to others but cannot “off-load” our accountability. Hillary’s responsibility would have been to articulate her expectations concerning the security of consulates and assure that her instructions were carried out. Others, perhaps well down in the organization, would have had the responsibilities for putting the expectations into effect.

Penn State, Sandusky, and Board Governance

There has been much discussion about the question of board culpability for the sins of Jerry Sandusky at Penn State and at his foundation, Second Mile.

In all the hand wringing about Penn State/Second Mile/Sandusky there is an underlying perplexity regarding, “what about the boards?” What is the business of accountability and responsibility and assuring both? People have no problem fixing blame and responsibility to individuals. We muddle around when it comes to the boards. We usually ask, “Did the boards react appropriately?” This belies our underlying mental model of governance by question-asking and reaction. We rarely ask, “What responsibility did the board(s) have to pro-actively minimize the likelihood of a Sandusky?” We have a hard time figuring that out. This comes from our view of board governance and the lack of clarity, even befuddlement, over execution of board responsibility to delegate and assure accountability, first, by assuring that board values (including the unwanted) are expressed and then reasonably, yet sufficiently, implemented.

What Does It Take To Get Us To Move? Even Improve?

I’ve been thinking about the relationship between decision-making, especially in the light of board governance, and actual change in a board’s or anyone’s) behavior. Here are some thoughts:

To change people must:
1. Be searching for applicable truth - be curious and have a sense of our need, even urgency in seeking truth–and be willing to seek truth in areas where you do not want it!
2. Hear truth - be open and looking. We naturally resist or deny truth that is, or may be, contrary to our present course of action or our beliefs. We rationalize why it doesn’t apply or may not be true. This, of course, also means testing the information we’ve received concerning its reliability and truthfulness–its alignment with reality.
3. Receive/accept/believe it. Without being convinced that what we have learned is true we will not go to the next step which is…
4. Internalize/absorb/grasp it - Not only be convinced that what we have learned is true but that it true for us and has meaning and impact for us. It is part of our reality and it creates emotional energy in us. We must apply it to ourselves and our situation. If not, we will not act, (unless compelled against our will.)
5. Begin to act on it. - practice doing it. Without practice there is no learning and growth in proficiency.
6. Continue doing it. Inertia works against us when starting something but in our favor when we have begun something and are developing the practice, (such as sticking to an exercise regimen or a diet). Author Jim Collins talks about the flywheel effect - that by giving small impulses repeatedly and persistently in the right direction we can get even a large, heavy flywheel spinning faster and faster. Excellence absolutely depends on persistence–getting better and better.

These principles apply to governing boards. I see boards all the time that get interested, profess the desire to improve and only begin before they falter and fail. Board members must believe in what they are being coached to do to improve their governance. It is almost always uphill against their current practices and often involves greater rigor for them. So the strong tendency is to begin with good intentions but then increasingly resist the need to change and then slide backwards. Generally someone on the board must take the role of the one who gives the flywheel a shove.
We experience this in our everyday life. Our spouse encourages us to keep doing something that for a variety reason we might fall back from, e.g., a diet or going to the gym. He or she gives our flywheel a shove. We need that.

Passion and Focus, A Board Requirement for Excellence

For a governing board to accomplish anything of significance regarding the quality of it governance, much less excellence, it, too, must have passion, i.e., care deeply, for its work. I say “too” because CEOs and employees are told all the time that they must have passion for the mission, and boards are told the same occasionally. But not passion for what should be their work - governing the organization well. No attitude of passion for governing with excellence and the board ends up reverting to old habits, i.e., passive laziness and reactive governance. I have seen it over and over. The board starts excited to improve (or, for example, implement Policy Governance) but stalls out (much to the growing cynicism of the CEO). However, couple passion with a clear vision for governing with excellence, and the board begins to focus. Focus results in persistence (follow-through on its original intent), and focus, coupled with follow-through, results in a developing character of tenacity and endurance to reach the goal - the board’s goal of excellent governance. Excellent governance transforms the organization and attracts excellent CEOs.

Resourcing Board Governance: Be Careful What You Call Yourself

Nonprofit board members may be unpaid but they are NOT volunteers. As I work with nonprofit boards across the country, especially faith-based ministry boards, and reflect on my own experience on NP and ministry boards, I have learned that the typical board thinks poor. Because they think of themselves as "volunteers," everything (except perhaps the audit, which is often required)regarding their governance is done on the cheap. Little do they know how much they are costing the organization for which they are accountable. They are unwilling to invest in themselves to improve their own governance, even become excellent if they tried. They seem not to realize they are as much a legal component of the organization as the CEO's office, or the financial section. Not only that, they, collectively, are accountable for the organization. They are NOT volunteers as one normally thinks of volunteers. In fact, if they get it wrong, they can suffer consequences, meltdown, front page notoriety, fines, bankruptcy, etc. Their job is to lead the organization, but most boards do not know how to do that, and they do not know they do not know. So they lapse into reacting and asking questions as they review whatever has been put before them, typically financial reports. Governance is providing both direction and protection. To do that well does mean some investment. However, considering the vital role the board (should) play, the relatively small percentage of the organization's budget good governance costs pales compared to the importance a good board can bring in value to its organization.