03.08.09
Blurry Visions – Clear Ends
Many people who work with boards of directors are familiar with the practice of creating written vision, mission, and sometimes values statements. The practice of reflection and deliberation is a good one, but these statements often become organizational icons representing the board’s hard work rather than providing the clear direction that is incumbent upon boards.
One of the reasons is the slipperiness of the terms. A quick search of official mission and vision statement shows a lack of clarity of the terms “mission” and “vision”. Is a vision a picture of the way the world will be in the future? Is it a definition of specific results? Does the mission express the purpose of the organization or how the purpose is achieved?
Take a look at the mission and vision of Coca-Cola Company. The fuzziness of carbonated drinks is only matched by the fuzziness of their mission and vision statements.
Our Mission
Our mission declares our purpose as a company. It serves as the standard against which we weigh our actions and decisions. It is the foundation of our Manifesto.
- To refresh the world in body, mind and spirit [Do they really measure their actions by whether they refresh the world's spirit? Doubtful].
- To inspire moments of optimism through our brands and our actions.
- To create value and make a difference everywhere we engage.
Our Vision
Our vision guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable growth.
- People: Being a great place to work where people are inspired to be the best they can be.
- Portfolio: Bringing to the world a portfolio of quality beverage brands that anticipate and satisfy people’s desires and needs.
- Partners: Nurturing a winning network of customers and suppliers, together we create mutual, enduring value.
- Planet: Being a responsible citizen that makes a difference by helping build and support sustainable communities.
- Profit: Maximizing long-term return to shareowners while being mindful of our overall responsibilities.
Maybe missions and visions are clearer in the nonprofit world. Not really. An expert in the nonprofit world describes mission very differently but no clearer.
Mission Statement – A mission statement should outline what the organization is now. It focuses on today; by it identifying the client(s); the critical process(es); and the level of performance. It has been said that a vision is something to be pursued, while a mission is something to be accomplished.
Allianceonline.org defines a vision statement as a “… vision is a guiding image of success formed in terms of a contribution to society. If a strategic plan is the “blueprint” for an organization’s work, then the vision is the “artist’s rendering” of the achievement of that plan. It is a description in words that conjures up a similar picture for each member of the group of the destination of the group’s work together.”
The poetry of visions and missions may be helpful to inspire and maybe even galvanize a staff, but they do not to much for directing the staff. The job of the board of directors is to clearly direct what the organization will produce.
Along with the fuzziness of these concepts, there is an additional problem in that there is often no mechanism for ensuring that the vision/mission, once set by the board, is carried out by the organization. Anyway, is the board supposed to set the vision and mission or is the management? This is all very confusing.
Ends as an Instruction to the Management
While organizations can continue to develop visions and missions, it is important for the board to specifically define what the organization will produce. Will the American Cancer Society produce increased research for the eradication of cancer? Will it produce an increase in the number of people surviving cancer or perhaps an increase in the public’s awareness of early detection? All of these are potential beneficial results of the American Cancer Society. These results are called “Ends”, a distinct word from mission and vision so that it can maintain a specific meaning. Along with the results, Ends determine who will benefit. Perhaps the American Cancer Society will work towards increasing survivability of cancer among kids below age 18. The increased funding might be directed towards major centers of cancer research, etc. Finally, Ends describe the priority or worth of these changes. Is research the primary priority with survivability for children a secondary priority at this time?
Ends policies provide a clear the tripartite structure that boards can use to measure to specific success of its organization.
- What changes or benefits will result from the work of this organization?
- Who will benefit or what will change as a result of the work of this organization?
- What are we willing to pay in order to achieve these results or which results are more important?
By creating these policies, board of directors can strategically guide the organization without the fuzzy missions and blurred visions.
04.28.08
Where the Rubberstamp Meets the Road
I have been visiting a statewide nonprofit to evaluate their governance system. These are really good people, smart, committed, the kind of people you would want as your neighbors. And yet, in this board subcommittee, they passed several proposals that they really did not understand the content of.
How do I know?
I asked several of them what the proposal was really about and they sheepishly admitted that they weren’t 100% sure. And why should they be. This report was the culmination of hundreds of hours worth of work. It certainly would have been odd to think that this subcommittee was in any position to cast a meaningful decision one way or another.
When they did vote, it was not clear what criteria they were using to judge the proposal. Did they approve it because they wanted to respect of the work of the subcommittee? In which case, why bother voting? Did they agree with the proposal itself? Clearly not if they didn’t even understand the proposal.
Rubberstamping is a perennial problem among boards that do not have an effective mechanism for providing oversight without micromanaging. What’s the answer? Create criteria for what would comprise an effective decision by the management of the organization.
For instance, when the board directs the management to create a budget, it should also describe the criteria for an adequate budget. The board might direct that any budget use conservative estimations of income. Rather than the board micromanaging each line of the income section of the budget or simply trusting the administration without any proof, the board requires the management to provide some reasonable proof that the income estimates are conservative. Perhaps the management compares their current estimates to a five year history; perhaps they ask an accountant to review the estimates and attest to their being conservative.
The point is that the board sets a standard and demands that the management demonstrates reaching that standard. This method is much preferred over the we-trust-you method that rubberstamping boards often employ.
Boards must oversee the work of the management, be they paid management or volunteer management, and they must do so in a way that does not micromanage the managers. If they do not have a mechanism to provide oversight, that should be the first think on their list of priorities.
04.26.08
Founder’s Board Grows Up
Founders Can be an Organizations Greatest Strength and Largest Impediment
We are working with a board that was started by the founder of the organization. Despite the title, the board is not ‘floundering’ but I couldn’t resist the alliteration.
The members of a founder’s board are often recruited by the founder, to whom the board members often feel a personal allegiance. These boards rarely challenge the founder and when they do, it is often after serious questionable activities and includes a great deal of rancor.
In this case and to their collective credit, the founder and the board members aspire to strengthen their organization in general by improving the functioning their board. The founder understands to spite is many talents, it may not be in the best interest of the organization to have him continue as the Executive Director. He is also wise enough to understand that a future executive director must have the authority to lead the organization. However, he wants to create a strong board that clearly directs the organization without micromanaging the future Executive Director.
We began our work by clarifying the roles and responsibilities of a board and how the board delegates to and interacts with their Executive. From here on, we create policies that further clarify what the organization is actually going to produce, what benefit will it bring to the world. The board will use this to simultaneously measure the success of the organization and the Executive Director.
Founder’s boards are common. What is uncommon about this one is the self-understanding on the part of the founder and the desire to help the board’s role shift and expand. Instead of a Founder’s board, we have renamed it a Fine Functioning board.
04.01.08
Fearing Fabian – Gratitude for Grassley
Fabian Giroux was feared by every student who attended his history class. His ample stature reflected an equally ample intellect which he unloaded on naive ninth graders three times a week. From all my years at high school, I only remember the paper I wrote for his class because I never worked so hard for a C+ in my high school career. Many students have memories of tough teachers who demanded more than the students thought they could produce. And most of those students would agree that they are better for being held to a higher standard.
Many nonprofits will remember Senator Charles Grassley with the same fond admiration as I recall Mr. Giroux, because Senator Grassley and his Senatorial partner Max Baucus are demanding greater accountability from nonprofits than the nonprofits even thought possible. In the American system, nonprofit success is predicated on building and maintaining public trust which relies on institutional transparency. After our dollars leave our pockets and enter the coffers of charitable institutions, how do we know that those monies are being spent appropriately? Too often we don’t, say Senators Grassley and Baucus. Their solution, expand the IRS Form 990, the equivalent to the IRS Form 1040, to provide a more complete picture of how nonprofits spend their resources.
Lying beneath this problem of trust and transparency is a lack of effective governance. Here is what Grassley and Baucus say in their May 2007 letter to the IRS:
Governance. Time and time again we have seen poor governance at the core of problems at charities. The IRS Commissioner in his March, 2005 letter to the Finance Committee made a similar finding: “Many of the situations in which we have found otherwise law-abiding organizations to be off-track stem from the failure of fiduciaries to appropriately manage the organization.” The Form 990 can serve a useful purpose of bringing a focus on governance issues both for the board and management of the charity as well as the public.
Grassley and Baucus are doing what so many nonprofit boards are failing to do: protect the moral owners of an organization. Grassley and Baucus are driven to act because the “moral owners,” the United States citizens, are paying billions for nonprofits to improve our world, and yet there is not an adequate mechanism to ensure that the owner/citizen’s interests are being carried out. As I learned from Fabian Giroux over thirty years ago, the Congress provides oversight to protect the interests of the citizens. What many nonprofit boards do not understand is that their job is not to run the organization but to protect the moral owners of the nonprofit whom the board members serve. I only learned about the purpose of boards later in life. Unfortunately, many nonprofits never learned this lesson at all.
03.04.08
Nonprofit Board Independence – Does It Matter?
“Let us pray for Bob and his family.” Everyone in the room of over a hundred people bowed their heads and prayed for the executive director of a religious organization who had made “irregular” purchases with church money. Bob (not his real name) is now awaiting trial, his misdeeds brought to light by an independent audit.
I admire the this religious organization who could still be concerned about Bob and his family while caring first about the organization from which he stole. While there are many morals to this story, one remains primary for boards. It was an independent audit that uncovered the transgression. It is highly unlikely that Bob would have turned himself in or returned his ill-gotten gains on his own. It is may be a sad commentary on human nature, but it is a reality that left unchecked, people will often act in their own best interests to the detriment of others.
This is why organizations have independent boards to watch over the management. But the real question is, of whom are these boards independent? The answer is that boards must remain independent of the management so that the board can hold the management accountable.
Here is where boards often falter.
When boards make management decisions, they become part of the management. When a board passes a budget, it is a management decision. When a board chooses to use one contractor over another, they are managing their organization. If the board chooses to add a staff member or reduce a staff member, the board throws off the cloak of governance and dons the mantle of management.
And when a board makes management decisions, it reduces its ability to hold itself accountable. This is no small dereliction of duty. When boards function as a fiduciary, its highest duty to ensure that the management is performing its work appropriately.
Thank goodness that the board of Bob’s organization understood their responsibility to remain independent from management and in so doing, prevented even greater loss.
Barry
Barry@TheSandbarGroup.com
02.10.08
PEJE Governance System – Good, Not Great
Partners in Excellence in Jewish Education (PEJE) is one of the most significant and influential forces in Jewish day school education. Not only have have consistently raised people’s awareness of the benefits of Jewish day schools, PEJE has raised the quality of day school education and instruction as well as the way day schools are governed.
However, their advice on governance raises the quality of governance but not enough.
The problem is that PEJE (and NAIS which PEJE relies on for their governance advice) does not emphasize basic governance principles. One of the first principles is that boards must be independent. Board independence does not mean that the school is free to set up its own mission and curriculum, rather, independence means that the board is independent from the administration. The board must not make management decisions because once it does, it becomes part of the management. What is the problem with that? Remember why the US has three different branches of government? We separate the powers so that there is someone who is independent who can watch over the other branch.
The PEJE governance recommendations do not create an independent boards and that is a shame. However, PEJE and NAIS are high quality, thoughtful organizations. Once they realize that some changes in their recommendations can further improve independent schools, I believe they will embrace those changes. If they don’t, I hope they have independent boards who will hold them accountable.
