Governance Do’s and Don’ts: Practical
Lessons from Case Studies on 20 Canadian Nonprofits By Mel Gill, Institute on Governance,
Ottawa, Ontario, Canada
There are approximately 175,000 Canadian voluntary sector/nonprofit
organizations in Canada, and more than 78,000 of these are registered charities.
These groups provide a variety of services for the benefit of the Canadian
public, including community service, arts, recreation, religion, social services,
education and health. They account for some $90 billion in annual expenditures,
assets of $109 billion and about 12 percent of Canada’s Gross Domestic
Product. They employ 1.3 million Canadians and benefit from the service of
some 7.5 million volunteers. Sixty percent of their revenues derive from various
levels of government.1 The effective governance of these organizations is therefore
clearly in the national interest.
The primary objectives of this research were
to:
Learn from organizations doing a particularly good job of
governance, as well as derive lessons from organizations that have experienced
major problems;
Develop a better understanding of how governance practices
in nonprofit organizations need to be adapted to take into account a variety
of factors
that influence
governance needs and functions;
Identify alternative governance models
available to boards and create a coherent framework for understanding these
models;
Provide support to boards and executive directors in understanding
what governance practices and policies may best suit or serve their
particular
organization;
Discover and develop a foundation of knowledge on
which to build additional tools and resources to assist nonprofit organizations
in creating effective
governance practices.
Responses derived from interviews and a Governance Self-Assessment
Checklist completed by board members and the CEOs were analyzed in conjunction
with relevant
documentation to assess the governance practices of 20 nonprofit organizations
in Canada. The study sample contained organizations from the education, health,
community/social services and crown agency sectors. The studies included
organizations ranging in size from a rural Lions Club with no operational budget
to a pan-Canadian
study of school board governance. The median budget size was approximately
$3,000,000.
Overall, we found that interest in governance issues has increased
tremendously during the past decade. This has been spurred by aggressive promotion
of the
Carver ‘Policy Governance’ model, and increased demands for greater
public accountability generated by governance problems in a number of high
profile cases. At the same time, alternative governance models have not been
readily accessible or well understood. As a result, many nonprofits have attempted,
with limited success and, often, considerable frustration, to implement the ‘Policy
Governance’ model or adapt it for their own purposes.
This research identified
several models currently used by nonprofit boards in Canada. They are referred
to in this report as: “Operational,” “Collective,” “Management,” “Traditional,” “Policy
Governance,” “Results-Based” and “Constituent Representational.” We
found most boards use a hybrid of these models created by applying practices
drawn from two or more models to different aspects of their mission or responsibilities.
We
examined how a number of factors influence governance practices. These factors
included: who “owns” the nonprofit; different processes for board
selection; the impact of size, complexity and geographic scope; mandate; form
of incorporation; financial circumstances; organizational history; knowledge
about alternative governance models; personal and political agendas; and critical
events and transitional phases. Although others also had significant influence,
we concluded that the most important factors in determining an appropriate
governance model were the size and complexity of the organization.
Boards and
CEOs rated their overall governance effectiveness between 70 percent and
75 percent of their preferred ideal on the Governance Self-Assessment Checklist
used in these studies. Areas of greatest strength were Board Culture and
Board
Structure. Human Resources Stewardship, Performance Monitoring and Risk Management
were generally acknowledged as requiring improvement. Although 30 percent
of the organizations had experienced serious financial crises at some point
during
the past decade, the Financial Stewardship of current boards was generally
strong. These conclusions were supported by an analysis of documents and
interviews with key informants.
The Major Concerns of Boards identified through this research
included: director liability; financial viability; adopting more “businesslike” practices
while maintaining human service values; how to “add value” to the
organization; finding the right balance between “policy focus” and
knowledge of operations; improving succession planning for board and staff;
strengthening board orientation; developing clarity between the respective
roles of board and senior management; improving measurement of board, CEO and
organizational performance; and, improving communication with stakeholders.
Signs of a Board in Trouble included: excessive turnover of
CEOs or board members; difficulty recruiting credible board members; rapid
depletion of reserve funds;
chronic unplanned or unmanaged deficits; role confusion between board and
CEO; low attendance or participation in meetings; poor management of meetings;
factionalism;
underground communications; unresolved conflicts; failure to address conflicts
of interest; decision deadlock; disrespect for organizational norms and policies;
and, poor communication with funders and other key stakeholders.
We also identified
the following Keys to Success:
Strong board and staff leadership
A positive working relationship between
board and CEO
Role clarity
Strong agreement of key stakeholders on organizational values,
mission and objectives
Respect for organizational norms, board policies and
decisions
Good board development practices and teamwork
Regular, objective assessment
of board, CEO and organizational performance
High levels of trust and low
levels of conflict
Constructive resolution of conflicts and ‘conflicts
of interest’
A good balance between organizational stability, flexibility,
innovation and enterprise
Consensus or ‘near-consensus’ decision-making
Effective management
of meetings and board work
The keys to success are easy
to articulate, but the doors to good governance are difficult to unlock during
the normal course of human interactions and
organizational politics. It takes resolute commitment to open communications
and a good deal of hard work. The early warning signs of trouble ahead are
usually easy to discern. Boards and funding authorities need to be vigilant
for these and to take remedial action before, rather than after, crises erupt.
Footnotes 1“Building on Strength: Improving Governance and Accountability in Canada’s
Voluntary Sector,” Report of the Panel on Accountability and Governance
in the Voluntary Sector (Broadbent Report) Ottawa 1999 p13.
