Document View

It is ironic that, while boards of directors often take heat for hovering over the details of organizational operations, corporate and nonprofit boards alike now face pressures - some mandatory, some voluntary - that require them to become more highly involved, particularly in the areas of finance and accounting. The Sarbanes-Oxley Act of 2002 has caused major corporations to scramble to comply with new accounting and reporting rules - and nonprofit organizations to take heed. Governance consultants and association leaders believe that for numerous reasons, accountability and transparency have become major trends in board governance and that real accountability happens when boards set strategy and staff execute the details. Because accountability is a key ingredient in achieving results and outcomes, focusing on strategy is a cornerstone of organizational effectiveness. The line between accountability and micromanaging is a thin one. Deliberate board training, true engagement of board members, trust and transparency, and board diversity are some of the key elements that spell a more seamless blending of the staff's and board's respective roles in reaching organizational objectives.

SEEMS IRONIC, DOESN'T it? While hoards of directors often take heat for hovering over the details of organizational operations, corporate and nonprofit boards alike now face pressures-some mandatory, some voluntary-that require them to become more highly involved, particularly in the areas of finance and accounting. The Sarbanes-Oxley Act of 2002 (read more about its implications for associations in the "Legal" column, page 17) has caused major corporations to scramble to comply with new accounting and reporting rules-and nonprofit organizations to take heed. But will this reaction add another arrow to the quiver of temptations that motivate boards to micromanage? Governance consultants and association leaders-both volunteer and staff-who commented for this article really don't think so.

What they do think is that for numerous reasons accountability and transparency have become major trends in board governance and that real accountability happens when boards set strategy and staff execute the details. Because accountability is a key ingredient in achieving results and outcomes, focusing on strategy is a cornerstone of organizational effectiveness.

"Trends in nonprofit management are definitely more outcome-focused," says Anne Gardon, principal, Strategies for Change, Poughskeepsie, New York. "Nonprofit organizations have been under the gun for several years now with the greater emphasis that funders place on predefining and tracking outcomes." At the same time, in her work with nonprofit boards, Gardon sees "a growing awareness of the importance of clarifying and distinguishing between CEO and hoard responsibilities so that the board hacks away from the tendency to micromanage. The |boards| are also figuring out how to establish greater and more meaningful systems of accountability, but this is not always straightforward or easy to do-and requires constant reinforcement."

Harrison Coerver, president, Harrison Coerver and Associates, Roca Grande, Florida, agrees that accountability is on the association screen. Coerver, who advises six to eight different boards per month, says: "They arc paying attention not so much to Sarbanes-Oxley but to the governance issues of the New York Stock Exchange and the U.S. Olympic Committee, which raised issues, among others, of the size of the board itself."

The line between accountability and micromanaging is a thin one. And several organizations have built effective processes whereby their boards can walk the line-seeking increased accountability by concentrating on strategic oversight while allowing the staff to take care of the nitty-gritty operations. Deliberate board training, true engagement of board members, trust and transparency, and board diversity are some of the key elements that spell a more seamless blending of the staff's and board's respective roles in reaching organizational objectives. And both elected and staff leaders agree that the process is an ongoing one and that the rewards of maintaining the proper balance-member satisfaction, increased efficiencies, exciting new initiatives, and so forth-are well worth the effort. Though some also observe that micro-management docs have its place. "The inclination to micromanage may not be completely linked to the nature of the board itself or the way that it operates-but more to financial viability," says Kathryn Aberle, CAE, associate executive director, Accreditation Hoard for Engineering and Technology (ABET), Baltimore. "If your organization is losing members and revenue and is undergoing other types of change, the board may feel legitimately that it needs to fix this." One need not look far-the New York Stock Exchange, United Way of the National Capital Area, and a convention and visitors bureau or two-for recent examples of boards becoming highly involved in operations, at least temporarily, in situations that demanded greater scrutiny.

Why boards micromanage

According to Hildy Gottlieb, governance consultant and author of Board Recruitment and Orientation: A Step-By-Step, Common-Sense Guide (2001, Renaissance Press), boards micromanage for six mam reasons:

1.The board has no clear sense of its role in the organization.

2.No policies exist that delineate appropriate roles for the board.

3.Management of day-to-day work is what hoard members know from their day jobs.

4.Board memhers have often been invited on the hoard to perform a task, not to lead.

5.Remnants of a crisis still haunt the organisation.

6.Board members sometimes fear that if they don't take charge of operations, no one else will.

Numerous solutions exist for moving the hoard away from being overly involved m operations, says Gottlieb. Step one: "Show board members a different role." Associations are discovering a number of ways to do just that. Following are some effective solutions.

Set clear expectations

"We have continually placed importance on board orientation," says John Patrick Francis, president and general manager, The Harrington Company, Minneapolis, an association management company (AMC) with 24 association clients under its wing. High on the list of orientation points that Francis notes are educating new board members on their roles, laying out expectations for fiduciary oversight, and pointing out the pitfalls of conflicts of interest. "We make sure," he says, "to make the clear distinction between strategy and operations. Of course, we explain what we, as the management company, will do, what we have responsibility for, and how we will be reporting results to the board."

Laying that kind of groundwork has been effective for Francis's clients, and the AMC runs into most of its micromanagement issues as a result of a particular board member's special interest in something. "If the association is building a new Web site," says Francis, "and a hoard member finds this exciting and has expertise in that area, he or she clearly may have a tendency to get overly involved."

Aberle admits that the hoard-staff relationship has been a work in progress for ABET. But across the past several years, they've moved from a more administrative board to one that is becoming successful in dealing with more strategic issues. "We've come a long way in finding the balance between strategic oversight and micromanagement," says Aberle, "and could probably not have done it without an outside consultant to deliver the message." One of the elements of that message was that board members should be looking at the entire organisation, which provides accreditation for college computer science and engineering programs by sending volunteers to the schools from the 32 professional societies that comprise ABET's membership. "With the issues facing higher education," says ABET Board President John Lorenz, vice president for academic affairs and provost, Kettering University, Flint, Michigan, "such as how to deliver the equivalent of a hands-on laboratory experience via the Internet or how to revise educational programs to accommodate the cross-disciplinary shifts that are taking place, there's no lack of challenging questions on which the board can focus." As a result, says Aberle, "board members are inclined to come up with strategic new ideas and initiatives for making things better."

At the Golf Course Superintendents Association of America, Lawrence, Kansas, Stephen F. Mona, CAE, CEO, reports that "the board has recently formalized a board-CEO compact, confirming that directors will focus on strategic thinking and leave the day-to-day operations to the staff, which will be accountable for results." Mona points out that this is a new model for GCSAA, traditionally so focused on attention to detail that the process-orientation often carried right through to the board. "With a hoard of only nine directors, being involved in the details of the association can get overwhelming," says Mona. "But it took an organizational audit to reveal that not enough strategic thinking was going on cither in hoard or staff dialogue," he says.

The audit findings at GCSAA have lit a fire under the leadership to effect a culture and process shift in the organisation that will allow dialogue on a much more strategic level. Says GCSAA Chairman of the Board Jon D. Maddern, superintendent of golf course, grounds, and facilities, Elk Ridge Golf Course, Atlanta, Michigan, "We're changing our committee structure such that hoard members will no longer serve as committee chairs and vice chairs, hut members who have particular experience and expertise will lead those committees. That will allow the hoard to focus on bigger things, while the staff will have increased interaction with members."

Engage volunteers

"We all have real jobs," says Jean V. Kane, hoard chair for the Minnesota chapter of the National Association of Industrial and Office Properties (NAIOP) and president and chief operating officer of WelshCo, LLC, Minneapolis. "So the hoard does not get involved in all the details of our initiatives. Our long-range planning committee is our think tank," Kane explains. The group is composed of NAIOP's past presidents and is focused on setting strategy and positioning the organization for the future. All professionals related in some way to the commercial real estate industry, NAIOP's 700 members look to the organization for strong legislative representation, education, and networking opportunities. On the legislative front, the chapter's current goal is to assist the public in understanding how Minnesota's new, more locally focused tax system works. "It relates to our state needing to be competitive from a tax standpoint in order to retain businesses," says Kane.

The chapter operates on a model that is a bit atypical. "We run it like a company, hut most of the work is done by volunteers |other than hoard members]," says Kane. "If we do a golf event, the committee members are stuffing favor bags." While each committee does much of the hands-on work, often with other administrative assistance from the staff assigned to it by The Harrington Company, it also must report back to the hoard with a financial report compared to the business plan and budget that were set forth at the beginning of the year. "It's a well-oiled machine that has been our operational model for a number of years," says Kane.

At GCSAA, a repositioning of staff includes a shift from reporting on activities and efforts to reporting on results. That way the hoard ran focus on the major issues facing the profession and the industry. "This is much more fulfilling work than listening to reports, receiving updates, and approving operational procedures," says Mona. "After all, our members who decide to get involved on the hoard do so based on a desire to move the profession and industry forward. They already manage an enterprise-a golf course-and they arc not interested in managing another."

Chairman Maddern is eager for the board to spend more time on the association's key issues, which include, among others, building respect and recognition for the role that GCSAA members play in the game of golf, focusing on numerous environmental issues in which GCSAA can play a positive role, and locating partners that can help facilitate its work.

Create an atmosphere of transparency and trust

One of the most important ways to keep the hoard focused on strategy, says ARET's Lorenz, is to maintain a high quality, competent staff. "The ABET board takes this very seriously," says Lorenz, "and we do that primarily by engaging in the annual evaluation process of the executive director, who in turn is responsible for the staff." Once the board's comfort level with staff competency is established, says Lorenz, it can focus on strategic issues.

ABET's associate executive director, Aberle, agrees that trust and transparency are critical in allowing the board to stay strategic. "We've done some new things in the accounting and financial area that make our operations even more transparent," she says. A comprehensive accounting manual that includes detailed procedures and processes is distributed to members of the board's finance committee. "And last year, for the first time, we opened up our audit process to a blind-bid selection process," says Aberle. From Lorenz's point of view: "The comfort level we have with the financial side of things is supported by the combination of people that we feel are competent and the effective accounting processes that we have in place. At the same time, we feel quite comfortable questioning what people are doing if we feel it's necessary."

The transition to a more strategic board is putting GCSAA's staff of 120 into the accountability seat. Says Mona, "We will now be responsible for cascading our strategic goals throughout the organization and for achieving those goals. The staff is energized, and we know that we need to operate under a new model."

From the board perspective, Maddern says that the focus on accountability will rest strictly with the CEO. "We plan to set the kinds of goals that will challenge staff. We'll leave it to the CEO to work with the staff and come back to us with plans on how they will meet our goals. And if they cannot, they need to tell us why-and what it will take for them to be able to."

Expand the meaning of diversity

"Selection of particular board members is definitely on the minds of the board members that we interact with," says The Harrington Company's Francis. "Nominating committees arc looking for more diversity and sometimes for specific individuals who can fill a need: an accountant, a marketing person, and the like."

"At ABET, we are increasingly recognizing the importance of diversity on the board," says Lorenz. "And that's not a matter of simply race, gender, age, and so forth. We're concerned about the point of view of individual board members. Yes, we have board members representing professional societies that are concerned with programs in science and technology. But, we're concerned that we have appropriate representation for business as well as academia and government." Such a wider scope, says Lorenz, allows the organization to focus on the big issues in a more informed way. For example, an industry advisory board that includes representation from industry, government, and academia is weighing in on the topic of what qualifications for graduates will look like in the year 2020-and how ABET should be preparing for the differences in educational content and format that might suggest.

For NAIOP, diversity means that the 14-member board includes people who have a decade or two of experience with the organization as well as a certain number of fresh faces every year. "We like this mix," says Kane, "because we think that the historic perspective coupled with fresh ideas is important in determining the goals and needs of the organization."

Look for the turning point

A key moment signaled that the organization's governance was about to evolve to a new level at GCSAA. Says Mona: "First, the board became convinced that they could be less involved in day-to-day activities and yet exert more control over the organization m terms of its overall direction. Second, they realized that they could hold the CEO-and by extension the staff-more accountable for results." Mona believes that besides creating a model in which the organization will become even more effective than in the past, the way the board and staff will now be working together will reduce the time commitment of board members. "We were seeing that fewer people were willing to pursue board service," he says, "and the big reason was time commitment. The way that the board is evolving now, those on the board will not only find that a strategic agenda allows them to work more efficiently-they will have much more fulfilling work to engage in and will be in a position to truly move the profession forward."