Association of Saskatchewan Forestry Professionals
Governance Document
January 2007
TABLE OF CONTENTS
Purpose Statement
Forestry Professions Act
ASFP Bylaws
Code of Ethics
Council Guidelines & Responsibilities
Operations of ASFP
Delegation of Authority
Conflict of Interest Guidelines
Council and Council Member Self-Evaluations
Rules of Order for Meetings
Considerations for Council Leadership
PURPOSE
The purpose of the Governance Policy and Guidelines Manual is to ensure that the management of the affairs of the Association of Saskatchewan Forestry Professionals is open and transparent.
Governance Policy and Guidelines have been brought into force through the Forestry Professions Act and the Bylaws of the Association as sanctioned by an affirmative vote of the council.
These Policies and Guidelines apply to all members, council and is a condition of employment for all ASFP staff and a condition of contractual arrangements with all contractors.
All incidents of non-compliance shall be reported to the Executive Committee in confidence. The Executive Committee shall work to resolve such reported incidents.
_________________
Michael McLaughlan President
The Forestry Professions Act
April 27, 2006
(See link to the Act at www.asfp.ca)
Bylaws
(See link the Bylaws at www.asfp.ca)
(See link for the Code of Ethics at www.asfp.ca)
COUNCIL GUIDELINES
COUNCIL MEMBERS
COUNCIL EXECUTIVE
The Executive Committee shall consist of the officers of the association including the President, Vice President, Secretary, Treasurer, Registrar and Past President.
TRAVEL GUIDELINES
Not withstanding any of the foregoing, travel is covered by the following guidelines.
Travel will be reimbursed for actual expenses that are reasonable, and as per the rules and regulations of the ASFP Council, and only with signed authorization on ASFP Expense Forms. Receipts are required for all expense items except for sec 4.2.4 and 4.2.5 below.
OPERATIONS OF ASFP
COUNCIL/STAFF RELATIONS – AN OVERVIEW
The organization proposed for the association will ensure timely and cost effective delivery of the objectives of the association as described in sec. 4 of the Forestry Professions Act. Members in good standing will elect a Council as described in the Bylaws. The Executive Committee of the Council will serve as the primary liaison between the office of ASFP and the Council. Generally, the Council will be responsible for develop annual work plans, budgets and other strategic initiatives that may arise, while the Executive Committee will have the authority to approve expenditures and redirect funding as required within approved work plans and budgets. It will establish Council agendas. Part of the monthly agenda of the executive committee will be a review of the financial statements, together with a determination that resources are in place for the next month’s work plan.
Management of the operations will typically include:
The Administration of Finances will include, but not be limited to:
These functions will be carried out through either an ASFP member, staff member or service contract. The Executive Committee of the Association of Saskatchewan Forestry Professionals will provide direction to the functions.
The process for obtaining staff and services are described below.
Under defined conditions, the ASFP will require staff to complete certain functions. The following staffing process will be followed.
OUTSOURCED OPERATIONS AND SERVICES
In most cases, functions and services will be outsourced. To ensure this is an open, fair and meets the needs of the ASFP the following process will be followed:
This delegation supersedes all delegations previously made with respect to the properties and operations under your management.
The Council authorizes the individuals occupying the positions listed to enter into commitments on behalf of ASFP to do whatever you determine to be necessary in the ordinary course of that portion of ASFP business that has been ascribed to you, subject to:
ITEM |
Council |
Executive committee |
Registrar |
Admissions Committee |
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All delegations shall not exceed or violate the limitations as set out in the act or bylaws |
all |
all |
all |
All |
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Authority to borrow money for ASFP |
Yes, according to ASFP bylaws |
None |
None |
None |
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Agreements executed in accordance with terms negotiated by the Executive Committee |
All |
Yes, according to approved work plan |
None |
None |
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In the area of compensation you are authorized to fix compensation for employees |
All |
All |
None |
None |
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All
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2,000 |
$500 |
none |
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All |
All |
All |
all |
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Capital expenditures. |
All |
none |
none |
none |
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CONFLICT OF INTEREST GUIDELINES FOR
ASSOCIATION OF SASKATCHEWAN FORESTRY PROFESSIONALS
GENERAL
Association of Saskatchewan Forestry Professionals (ASFP), its members and staff will guard itself against the following:
As skill and good judgment are required in order to recognize conflict of interest situations, Council members and staff are advised to consult with a another member of council or executive committee.
DEFINITIONS
Conflict of Interest: A situation in which a person has a private or personal interest, sufficient to appear to influence the objective exercise of his/her official duties.
Apparent Conflict of Interest: A situation where a reasonable person would think that the professional's judgment is likely to be compromised.
Potential Conflict of Interest: A situation that may develop into an actual Conflict of Interest.
GUIDELINES FOR COUNCIL MEMBERS
Often the Council may require the services of an outside consultant or organization to complete a project or task. Much of the work of ASFP is undertaken through contract services or temporary staff. Occasionally individual members actively participating on committees or the ASFP may be interested in undertaking the work on behalf of ASFP. In these situations the following guidelines can be observed for tendering processes:
In such cases an independent assessment of fair market value should be undertaken using the following guidelines while the interested partners excuse themselves form the decision making cycle.
GUIDELINES FOR STAFF
FINANCIAL
As prescribed by the bylaws and the arrangements with the ASFP banking institution, three members of the executive council have banking authority with two of three required in any financial transactions. In cases where the transaction is payable to one of the three authorized individuals, the other two shall authorize the transaction.
COUNCIL EVALUATION
COUNCIL MEMBER SELF-EVALUATION
• Am I still interested enough in the purpose of the organization to devote the necessary time?
• Do I attend meetings regularly and participate?
• To what degree do I keep informed of organizational activities? Of committee activities?
• How do I relate committee work to the total program?
• Do I know what is expected of me as a Council member?
• How objective am I in my thinking?
• Am I willing to take constructive criticism?
• Am I flexible?
• Do I take problems and criticism to the proper group or person?
• How have I improved my effectiveness as a Council member?
• Why do I enjoy being a member of this Council?
COUNCIL EVALUATION
Regular evaluation is a must for effective growth and development.
CRITERIA FOR REGULAR EVALUATION OF A COUNCIL
The adopted “rules of order” will be the guide at each meeting. Additionally, the following points will apply to meetings:
Following is Robert’s Rules of Order.
(Also known as “The Myers-Bourneot's Rules of Order")
.
INTRODUCTION TO ROBERT'S RULES OF ORDER
What Is Parliamentary Procedure?
It is a set of rules for conduct at meetings that allows everyone to be heard and to make decisions without confusion.
Why is Parliamentary Procedure Important?
Because it's a time tested method of conducting business at meetings and public gatherings. It can be adapted to fit the needs of any organization. Today, Robert's Rules of Order newly revised is the basic handbook of operation for most clubs, organizations and other groups. So it's important that everyone know these basic rules!
Organizations using parliamentary procedure usually follow a fixed order of business. Below is a typical example:
The method used by members to express themselves is in the form of moving motions. A motion is a proposal that the entire membership take action or a stand on an issue. Individual members can:
(The following is sourced directly from: www.bartleby.com)
Henry M. Robert (1837–1923). Robert’s Rules of Order Revised. 1915.
“4. Motions and Resolutions.
A motion is a proposal that the assembly take certain action, or that it express itself as holding certain views. It is made by a member’s obtaining the floor as already described and saying, “I move that” (which is equivalent to saying, “I propose that”), and then stating the action he proposes to have taken. Thus a member “moves” (proposes) that a resolution be adopted, or amended, or referred to a committee, or that a vote of thanks be extended, etc.; or “That it is the sense of this meeting (or assembly) that industrial training,” etc. Every resolution should be in writing, and the presiding officer has a right to require any main motion, amendment, or instructions to a committee to be in writing. When a main motion is of such importance or length as to be in writing it is usually written in the form of a resolution; that is, beginning with the words, “Resolved, That,” the word “Resolved” being underscored (printed in italics) and followed by a comma, and the word “That” beginning with a capital “T.” If the word “Resolved” were replaced by the words “I move,” the resolution would become a motion. A resolution is always a main motion. In some sections of the country the word “resolve” is frequently used instead of “resolution.” In assemblies with paid employees, instructions given to employees are called “orders” instead of “resolutions,” and the enacting word, “Ordered” is used instead of “Resolved.”
When a member wishes a resolution adopted, after having obtained the floor, he says, “I move the adoption of the following resolution,” or “I offer the following resolution,” which he reads and hands to the chair. If it is desired to give the reasons for the resolution, they are usually stated in a preamble, each clause of which constitutes a paragraph beginning with “Whereas.” The preamble is always amended last, as changes in the resolution may require changes in the preamble. In moving the adoption of a resolution the preamble is not usually referred to, as it is included in the resolution. But when the previous question is ordered on the resolution before the preamble has been considered for amendment, it does not apply to the preamble, which is then open to debate and amendment. The preamble should never contain a period, but each paragraph should close with a comma or semicolon, followed by “and,” except the last paragraph, which should close with the word “therefore,” or “therefore, be it.” A resolution should avoid periods where practicable.
Usually, where periods are necessary, it is better to separate it into a series of resolutions, in which case the resolutions may be numbered, if preferred, by preceding them with the figures 1, 2, etc.; or it may retain the form of a single resolution with several paragraphs, each beginning with “That,” and these may be numbered, if preferred, by placing “First,” “Second,” etc., just before the word “That.”
The following form will serve as a guide when it is desired to give the reasons for a resolution:
Whereas, We consider that suitable recreation is a necessary part of a rational educational system; and
Whereas, There is no public ground in this village where our school children can play; therefore,
Resolved, That it is the sense of this meeting that ample play grounds should be immediately provided for our school children.
Resolved, That a committee of five be appointed by the chair to present these resolutions to the village authorities and to urge upon them prompt action in the matter.
As a general rule no member can make two motions at a time except by general consent. But he may combine the motion to suspend the rules with the motion for whose adoption it was made; and the motion to reconsider a resolution and its amendments; and a member may offer a resolution and at the same time move to make it a special order for a specified time.”
Ж
There are four Basic Types of Motions:
How are Motions Presented?
a. Wait until the last speaker has finished.
b. Rise and address the Chairman by saying, "Mr. Chairman, or Mr. President."
c. Wait until the Chairman recognizes you.
a. Speak in a clear and concise manner.
b. Always state a motion affirmatively. Say, "I move that we ..." rather than, "I move that we do not ...".
c. Avoid personalities and stay on your subject.
a. The Chairman will say, "it has been moved and seconded that we ..." Thus placing your motion before the membership for consideration and action.
b. The membership then either debates your motion, or may move directly to a vote.
c. Once your motion is presented to the membership by the chairman it becomes "assembly property", and cannot be changed by you without the consent of the members.
a. The time for you to speak in favor of your motion is at this point in time, rather than at the time you present it.
b. The mover is always allowed to speak first.
c. All comments and debate must be directed to the chairman.
d. Keep to the time limit for speaking that has been established.
e. The mover may speak again only after other speakers are finished, unless called upon by the Chairman.
a. The Chairman asks, "Are you ready to vote on the question?"
b. If there is no more discussion, a vote is taken.
c. On a motion to move the previous question may be adapted.
Voting on a Motion:
The method of vote on any motion depends on the situation and the by‑laws of policy of your organization. There are five methods used to vote by most organizations, they are:
There are two other motions that are commonly used that relate to voting.
Parliamentary Procedure is the best way to get things done at your meetings. But, it will only work if you use it properly.
Meeting agendas are the responsibility of the President, General Manager, and/or Steering committee chairs.
Agendas will be formulated and distributed electronically and/or manually a minimum of 14 days prior to the meeting date to ensure review of any possible resolutions that will be discussed.
Council meetings will take place a minimum of six times per fiscal year, and Council Executive meetings a minimum of once per month, or more often by mutual consent
Staff meetings will occur a minimum of once per month.
CONSIDERATIONS FOR COUNCIL LEADERSHIP
About the Author
John Carver is a management and governance consultant/trainer. His specialty is in the operation of Councils of directors. His development of a “technology of governance” to enable a new level of effectiveness in the Council process is drawing increasing attention among nonprofit and governmental organizations. His academic background is in business, economics, education and psychology, wherein he earned his B.S., M.Ed. and Ph.D. degrees. Mr. Carver, who has managed public services for twelve years, is a frequent speaker and author on the topics of purpose, productivity and performance in the “nonmarket” sector.
Business Leadership on Non-Profit Councils
Summary
Business leaders have much to offer the governance of nonprofit enterprise. But for a number of relatively unexplored reasons, contributions by corporate directors and executives as nonprofit Council members have not always been as striking as expected. Peculiar circumstances of nonprofit agencies often ensnare knowledgeable managers and general public alike. Lack of clear bottom lines and meaningful market competition leads to a system which does not self-correct. Runaway size, costs and well-intended activities are bound neither by purpose nor by productivity requirements.
Futile attempts to “run this agency like a business” meet often with minimal success and much opposition. This monograph explains the governance of nonprofit organizations in a way which enables business insights to be translated into sound assistance at the Council level.
Community Service
Business leaders characteristically feel a strong obligation to community service. While they might volunteer their energies in a number of ways, their peculiar skills often draw them into service on nonprofit Councils of directors. This monograph is written to the corporate director or other business leader who donates time to the governance of a nonprofit agency.
Scope and Import of Nonprofit Councils
The variety of organizational activity in the nonprofit sector of our economy is fully as diverse as among business companies. Education, health, civic improvement, cultural and other functions are organized under not-for-profit corporate charters. Professional associations, clubs and chambers of commerce are as well. With the exception of the largest end of the scale, the diversity of size parallels that within business corporations.
The remarks that follow, then, relate to a wide variety of nonprofit enterprise. It matters not whether the agency is organized under a corporate charter or under any one of a number of government mechanisms. These comments are, however, restricted to instances in which an agency has a true governing Council, defined as an empowered body of persons charged before the law with ultimate accountability for the authority over organizational activity. Advisory Councils or other committees and councils whose authority to act is at the pleasure of another group or individual are excluded.
Councils addressed by this monograph, are those which are tantamount to the corporate Council of the business firm. They may be called Councils of trustees, regents, commissioners, governors or any one of a variety of titles. The salient feature is simply that they be the legally accountable body for the organization.
The Nonprofit Challenge
The aggregate effect of all nonprofit agencies on our public life is staggering. Peter Drucker (Wall Street Journal, October 3, 1978) has drawn attention to the rapid growth of what he terms the “third sector” (neither government nor business), noting that it may now employ more persons than all levels of government combined. Yet we know little, he found, of “its economics, management, performance and impact.”
Surely there are grave flaws in the management of nonprofit enterprise. Rather than catalogue them here, in the interest of space I will allude to them in a more positive perspective manner later. It suffices to say that the “third sector”, like government, is ripe for improvement. Dale McConkey contends (MBO for Nonprofit Organizations, AMACOM, 1975) that the next major breakthrough in management will occur in the nonprofits.
My extensive experience with both nonprofit and governmental enterprise suggests that breakthrough will come about through two routes: First, we have yet to apply the concepts and principles of professional management in a rigorous way to the administration of nonprofit agencies. Although there is a developing literature on the subject, nonprofit organizations are by and large still directed by managerial amateurs in ways which routinely violate the most elementary rules of good management.
Second, we have no coherent conceptual framework with which to design the Council’s job. Governance proceeds along a seat-of-the-pants course just as management several decades ago. Unlike the subject of internal management, on which there is at least widespread agreement that improvement is needed and perhaps on its way, the topic of governance is a virtual vacuum. In the way that MBO is a technology of management, we are strikingly in need of as helpful a technology of governance.
A technology of governance would answer not only to the morass of busy ineffectiveness in which most nonprofit Councils find themselves, but to the basic flaws of nonprofit management as well. For poor management it allowed to exist (and often caused) by inadequate governance. Because conditions are similar for nonprofit and government enterprise, the potential impact of better governance and management is vast, especially in an age which sees increasing amounts of national economic activity in those sectors free from the discipline of the marketplace.
Profit - Nonprofit Differences
The executive or director familiar with business Councils will find some obvious differences between profit and nonprofit organizations and their Councils. Most obvious, of course, are that nonprofits have no holders of equity, no accounting function called profit and no distribution of earnings.
Nonprofit organizations ordinarily address socially determined areas of human need which, for whatever reasons, the market system has not met. It would be well to keep this point in mind inasmuch as one self-survival tactic of a nonprofit is often to compete with a developing market system. The nonprofit Council, much less its staff, is hardly disposed in time of stress to bow out graciously if the market system becomes able to address the needs for which the nonprofit organization was created.
The need areas addressed by nonprofits are often complex and entangled with human problems and social conditions. These are often intangible, subject to the influences of social change and not open to single product solutions. Deep conflict of values is often barely below the surface of polite Council discourse
Funding is often an involved arrangement of philanthropic or governmental sources, each with an array of requirements, reporting methods and inspection styles. These are sometimes even in conflict with one another. Reliance on government mechanisms imposes much of the short-term thinking, last minute dicta, bureaucratic rigidity and quick starts and stops inherent in the caprice of governmental operation.
The staff are often quite highly skilled, though usually not in management. Professional identification with technical disciplines can be striking. Loyalty may be much stronger to extra-organizational professions than to the organizational mission. Effectiveness can easily become less important than looking professional to other professionals. Many nonprofits employ highly trained persons. Elitism, turf protection, disproportionate regard for academic credentials and impatience with “lay” control all combine to demand a great deal from any would-be Council leadership.
The nonprofit Council is characteristically larger than the business Council. While industrial Councils average around 11 directors, it is not uncommon for nonprofit Councils to have 20, 30 and even more members. The awkwardness of size may be the first difference with which a new director is impressed.
Directors are ordinarily unpaid and the concept of inside director is virtually unheard of. Complete separation of Council and staff, which may or may not be in the future of business Councils, is a way of life for nonprofit Councils. Unfortunately the clarity of separation is not always reflected in clear differentiation of job roles.
Directors differ greatly in ability. This is not an unknown circumstance in business Councils, but there is greater likelihood that business directors are chosen for their effectiveness than nonprofit directors are chosen for that purpose. Nonprofit Council appointment is more likely to be related to social prominence, class, compatibility and sometimes inclination to contribute funds. Among nonprofits created under or funded by federal programs, Council appointment tends to be related more to representatives of various classes than to ability. Competence, of course, can be found among all peoples, but nonprofit Councils have often been less than effective at attracting it. The great variance in skills results in silent directors, leadership by the vocal few and frustration for the effective director.
When the nonprofit organization itself is small, the Council of directors may be a workgroup as well as a governing body. This duality is akin to the small and closely held family corporation where the Council exists only due to legality. There may be no staff at all, a common condition in professional societies and advocacy associations. This situation is a problem only when the Council fails to recognize that it has two distinct roles: workgroup and governing body. The governing role is usually the one to get short shrift.
The Profound Difference
These foregoing items will be obvious to a business executive or director embarking upon nonprofit Council service. There is a less obvious peculiarity, however, which has a profound effect upon nonprofit operation and upon the Council task.
The basic building block of commerce is a marketplace wherein vendors and purchasers freely exchange value for value. Nearly all nonprofit organizations are free from the starkly impersonal judgement of that arena. This break in the critical vendor-purchaser link sets the stage for a fundamental nonprofit circumstance, one which renders the entire list above merely cosmetic.
It is not the nonprofit status itself which causes this phenomenon. Profit makes little fundamental difference in managerial or governing functions. It need not reduce or enhance excellence, nor cause decision making to be substantially different. Except that the nonprofit status avoids taxation and distribution of earnings, it is virtually meaningless to the operation of the enterprise. It is the nonmarket status which matters; this monograph could more accurately have been directed at the broader category of nonmarket Councils. The comments made herein apply to governmental Councils, commissions and councils because they, too, are nonmarket. In fact, the category of nonmarket governing Councils will include elected political forums such as legislatures and the U.S. Congress.
Much of the challenge facing directors of a nonprofit Council grows out of the peculiar situations arising from non market status.
For example, because the market does not operate to determine whether a product costs too much or is not sufficiently effective, there is at best only a verbal process to decide these values. Market determinations are made by real action choices of consumers as opposed to verbal statements of preference or belief. In the absence of the harsh but real behavioral choice of the marketplace, decisions are nonetheless made regarding product costs and quality. But these decisions are made through a verbal evaluative process, not the more honest behavioral one. These decisions may be made by funding bodies or by Councils of directors. More often, due to governing Council default upon such basic issues, decisions which would have been made by the market are made instead by staff.
The critical role of market surrogate is peculiar to nonmarket Councils. It is challenging responsibility which business Councils never have to consider. Unfortunately, nonprofit and governmental Councils often fail to consider it as well and, because excellence in performance is rarely required for their survival, are never called to task for the omission.
A Technology of Governance
Corporate directors and executives who have developed the skills of professional management have much to offer the nonprofit Council. It is necessary to have learned the concepts generic to all management, not just the body of knowledge specific to a particular business; not all directors or executives have done this. Principles of management may be profitably applied in nonprofit settings, but only if the fundamentals are well understood. Management methods learned in one industry may not transfer directly to another; het the concepts and performance-oriented mentality can be powerful when abstracted properly between industry and industry or profit and nonprofit.
Still, competent business leaders fail to contribute as much as they could on nonprofit Councils. Sometimes it even appears that membership on a nonprofit Council is a condition in which excellent managers forget most of what they know about the art and science of their calling. Clearly there are circumstances peculiar to the nonmarket status of these Councils which are predictably seductive, routinely entangling competent and dedicated persons in trivia, short-term issues and in nonproductive business.
The tendency of nonprofit Councils to become, as I have published elsewhere, incompetent groups of competent people is uncanny in its strength. This problem is the chief reason that a technology of governance is surely needed: to do for governance what precision management techniques have done for operations. Business Councils are not better off than nonprofit Councils in having a coherent framework from which to operate, but they are not so adrift without it. The market does its work; bottom lines are by nature more clear. Without a market (except a verbal, rhetorical one) and without crisp bottom lines, the nonprofit Council is often wasteful in its use of directors’ time, undecided as to its goals, unable to provide a firm foundation for management and incapable of the discipline required to achieve productivity for today linked clearly to a vision for tomorrow.
There can be technological development in governance, though our Councils-will-be-Councils judgement suggests that my belief is not widely shared. My chief pursuit for several years has been the development and teaching of an nascent governance technology, applied to nonprofit and governmental Councils wherein lies its strongest led. A brief monograph affords too little space to describe such a complete rethinking of the governance function, but a number of useful hints from the approach can be shared here.
The organization of Council functions on which these comments are based is called POLICY GOVERNANCE. It is founded on the simple fact that control of value is the most efficient control one might exercise. Governing by policy (explicit statements of Council values on various topics) enables a Council to attend to the big questions, to focus on the long term, to avoid trivia, to demand excellence in management and to overcome the nonmarket dilemma.
Moral Ownership
Rational determination of the nonprofit Council’s role must start by clarifying who is its “moral ownership”. Business Councils may be more or less mindful of their ownership, but there is little doubt that holders of equity are that body. Moral and legal ownership is, in this case, the same. Nonprofit Councils have no stockholders but surely to have, as the term is coming to be used, stakeholders. Community mental health centres, public schools and state agencies often have easily identified populations as their moral ownership. Professional and trade associations, civic groups and interest clubs are usually accountable to a circumscribed membership. Councils of symphonies, museums, universities and public television and radio must engage in some deliberation to decide upon the less delineated ownership to whom they are most reasonably accountable.
In any event, nonprofit directors should be clear as to whom they officially consider to be their moral ownership. This is not related to funding sources to whom a Council is accountable by virtue of contract (to receive funds in exchange for rendering certain services or behaving in a prescribed manner). It is a separate and prior consideration more organically relevant to the corporate character. A school Council, for example, owes its primary allegiance to an ownership consisting of the citizens of its district, not to a state or federal agency which contributes many dollars nor only to parents in the district.
Determination of the ownership is important since it is in the ownership’s interest that the Council must responsibly act. A Council often initiates discussion of its role by examining the relationship with its chief executive. This is unfortunate, for we thereby ignore a critical connectedness between an organization and its base of enfranchisement and we impart an internally-focused bias to all further proceedings.
Ends
Focusing internally to the exclusion of the external is best illustrated by nonprofits which attend very little to the ends (outputs, impacts) of production and quite minutely to the means (methods). This is tantamount by running a business which can ignore the market. Methods, appearances, credentials and words would suddenly acquire more importance when previously their worth would have been based on their contribution to market performance.
Purpose
The primary statement of ends is purpose. In some ways, the establishing of a succinct purpose is parallel to deciding what business you are in. But there is an important difference. For the business corporation it is understood that achieving a reasonable return on equity underlies all corporate affairs. With that obviously as a given element, “what business are we in?” is then best answered in terms of the human need(s) to which the company will address itself.
Nonprofit organizations are not always clear about how to translate the underlying issue of return. Further, they usually phrase their purpose in terms of some set of activities in which they will engage. “To provide X type of services” is a common phrasing. Consequently, purpose is rarely stated as an end product, but as a means to some unstated end product.
The corporate director or executive should be able to recognize the fundamental flaw introduced to nonprofit operation by using, as one’s corporate reason for existence, a means rather than an end. From the national scene (where Congress appropriates money for activities, not for results) to the small agency Council (where good works suffice for having really changed anything). the foundation of non-competitive enterprise is faulty indeed. Hence, great bureaucracies justify their existence (and even further growth) on busyness rather than impact. In most nonprofit agencies, a host of non-bottom line issues, in lieu of results, acquire disproportionate importance: credentials, looking busy, working hard, safe behavior and so forth become the chief values.
Nonprofit purpose is most profitably put in terms of what is to be different in the world because we do business, i.e. what will change for human beings. Will people have more coping skills for everyday life (a developmental disabilities agency), fewer psychological interferences with normal social and productive functioning (a mental health center), greater diversification of the employment base and more favorable conditions for business growth (an economic development commission)? Corporate leaders have learned the great folly of what George Odiorne called the activity trap (Management and the Activity Trap, Harper & Row, 1974); there is no reason to countenance the activity trap in nonprofit agencies any more than in an enterprise whose goal is a reasonable return to stockholders.
Products, Customers and Costs
The purpose should be complemented by further ends policies. If purpose is the satisfaction, reduction or creation of some human condition, the nonprofit Council must go further to say which conditions in which persons and at what acceptable cost. Such policies in a mental health center might call for a predominant emphasis on serving the severely (rather than moderately) disordered at some projected level of effectiveness at a cost on or below the “industry average” (a figure often available form state statistics.).
It is important that the nonprofit Council speak clearly and deliberately to these ends issues, for they comprise the basic value questions of the organization. Every good result has an opportunity cost: philanthropic or has generated funds could have been used for other human needs (not least among which would have been private use). The issues of (a) how much impact on (b) which needs is (c) worth what foregone opportunities is the most critical set of questions the nonprofit Council has before it.
Yet those issues are largely settled by default rather than by deliberation; they are determined by happenstance, staff preferences and expediency. Councils are usually too busied with items of demonstrably less import while they avoid their primary obligation to enunciate organizational ends. Drucker has warned that nonprofit agencies can become very efficient at doing the wrong things. Such an unfortunate situation is common and can be directly ascribed to the failure of governing Councils to control the ends.
Means
The main reason nonprofit Councils leave ends inadequately addressed is their preoccupation with means. Like the unsophisticated manager who becomes highly involved in prescribing his or her subordinates’ method of obtaining results, Councils intrude routinely into the management process. Councils should, by and large, stay entirely out of means to be used by their subordinates except to prohibit the means which will not be tolerated.
If we are to become results-oriented in nonprofit enterprise, there must be far more innovation, constructive risk-taking, freedom to experiment and payoff for performance. Professional managers know that these are the conditions necessary for today’s productivity and tomorrow’s technological development. Nonprofit Councils stifle innovation and reward conformity by prescribing means.
They are often at the mercy of higher Councils (Congress, legislatures) who foist these conditions on all agencies receiving government funds. When means are set from above (especially when, at the same time, ends are not rigorously stated), excellence in management is impossible. In fact, good and band management skills may be indistinguishable. An experienced captain and a landlubber sail equally well in a ship whose hull is full of holes.
Of course, all means are not justified by the ends. But most are. Those means which a Council, in contemplating its values about ethics and prudence, feels should not be violated may be said explicitly. It is best to address such matters negatively (say which limits, minimums, maximums, etc. may not be crossed) to avoid regressing ever so imperceptibly over time into prescribing means again.
Examples of Council prescriptions of means might be policies which, with respect to the chief executive and his/her designees: prohibit unfair or inhumane treatment of employees; limit the amount of capital funds which may be expended; put a floor under the conservatism with which revenues may be projected in budgeting; prohibit the establishment of employee compensation outside a range reasonably related to the geographical or professional market for the skills employed. Content of these policies depends solely on the values of the Council. Means constraints should be imposed soberly since each one will cost the Council some amount of potential executive creativity and flexibility.
Councils need not establish the traditional “personnel policies”, need not examine budgets in fine detail nor “approve” staff actions. By careful language at an appropriate policy level, sufficient clarity can exist to free the Council to get its own job done. The characteristic “approval syndrome” in nonprofit agencies comes about because Councils have not done their jobs competently. When prescription of ends and proscription of means have been explicitly addressed to the chief executive, enough executive authority can be delegated to assure responsible action without the inefficient “keep coming back to parent” kind of bossing style.
Monitoring
All this assumes, of course, an adequate monitoring or control function. The Council, in order to rely on governance by policy, must at all times be assured that its policies are followed. Unplanned, happenstance monitoring is the predominant method leading nonprofit Councils into vacillation between keeping on top of nothing and trying to keep up with everything. Councils can well use the corporate manager’s skill in carefully selecting the indices to be monitored and the periodicity of the control. Obviously, if the emphasis is on the results (ends) rather than means; it is easier to select reasonable measures of performance. Monitoring means is an illusion of ends control, however extensively it may be designed.
Illusions of control are common. The revered monthly financial statement is usually such an illusion. It is not out of the ordinary for most Council members to “approve” the report with little understanding. (What approval means in this context is itself difficult to construe as a meaningful action.) Certainly there is useful knowledge to be gleaned form financial reports, but the particularly important information must be extracted from a mass of tangential data. Since the financial control to be exercised by a Council need not be at the technical level of the controller, a useful course of action is to determine exactly what financial monitoring questions should be asked by the Council. The consistently meaningful fiscal report would be comprised of pointed responses to those questions.
The purpose of any monitoring is to answer specific management questions about conditions. For control to be cogent, certain requisites are necessary: We must first have said what the condition should be at this point in time on a given matter (“how are we doing?” only makes sense after we’ve planned). We must have given sufficient thought to what is to be monitored so that we can be focused about it. Monitoring a few summarizing, integrating variables is a far more powerful tool of control than monitoring many variables simply because they can be obtained.
The bottom line mentality which corporate directors and executives might bring to nonprofit Councils can help save the control function from the extremes of abdication on the one hand and panicked flurry on the other.
Levels of Issue
Whether issues of ends or of means constraints, all issue topics may be separated into levels. It is far more functional for a Council to consider its concern to be the top level of all issue areas than to deal with all levels of some issue topics and no levels of others. That is, the Council-staff differentiation should be by levels of issue, not by topics.
Harold Koontz (The Council of Directors and Effective Management, McGraw-Hill, 1976) emphasized “that determination or approval of major policies does not in itself get the Council of directors into day-by-day decision making.” He found that some business executives “fail to make this distinction, thinking that the power to make policies in a given area implied that the Council would make all the detailed decisions in that area.”
In speaking to any specific area or topic, the Council’s “level of concern” would obviously be the broadest. Whatever policy is rendered at that level could be looked upon as “containing” all further prerogatives of the subordinate decision structure. If the Council statement is carefully put, then all executive choices which are, in fact, within the broader guidance are acceptable without further review. (A routine monitoring system which need not take Council time automatically assures the Council of this “in fact” proviso.)
Many unnecessary tasks in which Councils become involved could be avoided. Councils characteristically get quite caught up (or, rather, dragged down) in personnel and budget issues, to name but two. Rather than decide what to address at their level of concern about these issue areas, Councils often get into the details of both. Councils can be indiscriminating as to priority or breadth of the details they choose to deal with. They very often, in an ironic reversal, will spend time on issues in opposite correlation to their importance.
The Council may extend its concern into lower (less broad) levels if it wishes so long as (a) it does not trade away its ability to maintain sure control over the whole in order to get more detailed in a few topics, (b) it moves in smooth sequence to lower levels of issues rather than jumping willy-nilly into far lower (and, therefore, delegated) concerns. If these principles are followed, the chief executive can be empowered without reservation to exercise full authority beginning immediately when the Council’s explicit statements have stopped. Council control and executive freedom from intrusion are both achieved simultaneously.
The Executive Link
While this view of the Council-executive relationship is merely a translation of proven principles of management, it is quite disparate from the usual Council style. Nonprofit Councils have tended to be quite lax in demanding that their chief executives manage. Amateurism has been acceptable. Those who have sought to press for more adequate performance have sometimes been ignored with the justification that “you can’t run this program like a business”. Yet, business or not, the task of the chief executive is to transform purpose into performance; whether performance is measured in profit is of the consequence to the management responsibility. While it is not necessary nor is it appropriate to run a school system community service agency or city library “like a business”, there are, nevertheless, principles under which supermarkets, foundries, hospitals and mental health centers alike can best marshal capital and human skills to produce new value.
How the Council relates to its chief executive will go far to determine whether he or she will see the task in these terms. Councils who treat their CEO’s like clerks will likely get clerk behavior. Councils who default on their own duties (chiefly on the obligation to enunciate organizational policies well) or who meddle in administration are inviting their CEO’s to be Milquetoasts or manipulators.
Policy Governance
Governing by policy is an advanced approach to Council operation. Policy governance is based on the fact that control of values is the most powerful control to be exercised with a given amount of energy or attention. Decisions and other behaviors, whether of individuals or organizations, derive from the application of values to specific circumstances. My values can be inferred from my actions, some more clearly than others. In fact, my actions are probably more true to my real values than my words might be.
You may control me by sticking close by and determining every action I take. But that kind of control requires a tremendous amount of attention and energy on your part; you certainly could not manage in that manner. If, however, you could control my values, with much less expenditure of your own involvement, you would achieve a great deal of control over the action in my life. Policy governance enables a governing Council to determine major organizational values in as simple, clear and certain a manner as possible.
But values by nature are subjective; they relate to relative importance and to judgements of ethics and prudence. Their very subjectivity (as well, of course, as their powerful effect on the organization) is a prerogative of ownership, not of professionals or technicians. What is an acceptable return on equity? What is an acceptable risk in entering a new business? How much short-term profitability will we sacrifice for long-term market share? What ethical minimums will we observe in treatment of employees regardless of productivity effects? These are value issues of considerable import to the corporation. Their resolution may be referred to as policy.
But the resolution of these and other such issues is not always explicit; often it is unstated, open to wide interpretation and therefore unavailable for use as a clear guide to management. Implicit policy is born in default, it is impossible to delegate well, it signals an abdication in the proper authority sequence and enables important issues to be avoided, at least for a time.
For the nonprofit Council, other than policies dealing with the governance process itself and with the approach to executive empowerment and appraisal, the major policies should deal with the four outstanding value issues which confront nonprofit operation: what good shall we do? . . . for which people or needs? . . . at what cost in other opportunities ????? with allegiance to what standards of ethics and prudence?
A rigorous attention to policy development does adequate discipline at the outset, but it greatly simplifies the Council’s job while demonstrably adding its effectiveness. This enables the Council to have a paved, deliberate approach with a long-term mentality, to avoid crisis governance and to lay the foundation which assures management performance. This approach both enables and requires Councils to relinquish making decisions about one event after another in favor of examining those values on which they would have based their decisions on those events. The use of Council time, then, makes a dramatic shift from a constant stream of decisions to the studied enunciation of values.
Council’s Job Description
Using the “values contributed” or “key result areas” method espoused by most modern proponents of MBO., the following is the irreducible minimum job description:
1. Adequacy of linkage with the moral ownership: The organizational connectedness to its moral ownership is a unique contribution of the governing Council. This function ties the organization into a larger legitimacy and ensures against an inward focus of the governing body.
2. Completeness of explicit statements of value to be served and observed by the organization: The definition and circumscribing of the organization in terms of values, is the policy creation obligation of the Council. Those policies must be categorized in a way useful to organizing the Council’s thoughts; and they must be capable of being “managed from”.
d. Policies constraining executive authority. These put limits and prohibitions on chief executive authority; they are the means constraints policies with respect to treatment of staff, assets, neighbors, compensation and so forth.
3. Assurance of executive performance: The Council must intend that its policies are complied with and take necessary measures to assure performance. This will require a satisfactory monitoring system and the resolve to act decisively with respect to executive failure to perform.
A Council might take upon itself additional areas of responsibility (such as funding level or public image), but certainly has the option to delegate them. These three, however, are undelegable; if the Council does not contribute these characteristics to the organization, they will not be contributed with legitimacy.
Having adopted a formal statement of its job, the Council must then formulate whatever discipline is necessary to stick to it. One important technique is to test any discussion topic against the Council’s job. Councils have a tendency to talk about anything anyone brings up. This habit not only wastes directors’ time, it seduces them into matters below their legitimate level of concern, into prescribing subordinates; means and into issues of too short a time horizon for Council involvement.
Council Performance
Only with a coherent conceptual framework can a Council rationally design its job, MBO is one such framework for administering; it has provided managers a sound foundation which puts in perspective concepts like productivity, performance, accountability, evaluation and management information. The need for a useful governance scheme is no less striking than management’s need several decades ago. Governance needs a moral equivalent of MBO.
Only with a clear design of its job can a Council plan for and appraise its own performance. Good performance at the wrong things is common for nonprofit and governmental enterprise. Certainly that deficit at the organizational summit predisposes nonprofit agencies to a host of managerial perversities. Meaningful accountability of the whole is difficult if not impossible when the most controlling segment fails in performance.
Only with an eye toward carefully planned performance can a Council decide what sills, understandings or contracts must characterize its directors. The selection of Council members, given at least as much care as the filling of staff positions, can lead to a Council mixture with contributes to advancement. The wrong qualities, regardless how prized or finely honed, can preclude good Council development and performance.
Only with excellence in Council performance will we be able to achieve excellence in management. In fact, poor Council performance not only allows, but demands poor management Nonprofit and governmental management today is seriously flawed due to failures in governance. Agency Councils are microcosms of Councils of the bodies politic in this regard. But purpose can be defined, values to be served can be deliberated and explicitly stated, the moral ownership can receive primary allegiance, executive achievement can be assured. These goals of Council performance, if met, can bring about a rebirth of vitality, creativity, and productivity in nonprofit enterprise. Taxpayers and contributors deserve no less.
Tomorrow’s Challenge
The impact of more effective governance could be awesome. Our nation has, over the past half-century, shifted much economic activity from private to public hands. The off time unnoticed benefits of the marketplace as a system cleanser and self-correction device will be sorely missed. The burden placed on governance (in Congress, legislature or nonprofit Council) to impose as much market discipline as possible is greater than current governance methods can support. More sophisticated governance is imperative.
Further, the ability of communities to coordinate satisfaction of their needs (rather than look dependently to the statehouse or to Washington) requires of local citizen Councils far more adequate governance. They must be able to govern their own agencies with enough ease to have energy left over for Council-to-Council communication. That communication must be expressed in greatly “boiled down” terms of what good (results) is to be done for which needs at what cost. The technical language of staffs will only bog Councils down in details, description and jargon. Presently, unable to communicate with each other (even through United Way consortiums), local agencies spend far more time talking with their state and national counterparts than with each other.
Surely there is much technological development of governance to be done. Business Councils have not led the way. The starkly obvious bottom lines available to them and the rigorous market taskmaster have acted, like Adam Smith’s unseen hand, to define and enforce successful performance. Nonprofit Councils have a more evident need for a sophisticated governance ideology and technique in order to overcome the lack of these conditions.
It is not out of the realm of possibility, however, that business Councils might in the long run profit from nonprofit advancements. Directors and executive serving in both sectors will be the connecting link.
FAST TRACK TO ACCOUNTABILITY
by John Carver
Forget the old approval process. To achieve fiduciary responsibility, Councils should focus on the ends instead of the means
Fiduciary duty conjures up images of cash controls, frequent financial reports, stringent purchasing procedures, annual audits and other restrictions meant to ensure that money is safely held and appropriately spent. Indeed, fiduciary responsibility to most people means taking great care in handling money.
Viewed in its broadest context, however, fiduciary responsibility means getting value for value spent or incurring costs appropriate for the goods or benefits acquired. The Policy Governance model, my radical redesign of the Council job, places the Council’s central focus on fiduciary responsibility in this very context. Primary Council attention is directed at establishing organizational ends, such as the specification of the quantities and nature of benefits to be produced, recipients to be benefitted, and the acceptable cost of benefits.
Traditionally, Councils have not dealt directly with these factors. Usually, they take great pains to prescribe and retain approval authority over the means used by staff while leaving ends only indirectly addressed. (Ministries deal similarly with transfer agencies and municipalities.) Sure, everyone pays rhetorical homage to fiduciary duty. But in too many cases, the most consequential aspects of the responsibility -- those which make the most difference in terms of value produced for value expended -- suffer uncanny neglect.
It has always seemed ironic to me that the care of assets so often receives more attention than their productive use. Assets are not acquired to be protected, they are acquired in order to be used -- prudently and efficiently to be sure -- for a greater return.
By no means is this to say that the more mundane aspects of fiscal responsibility can be ignored. Certainly, organizations don’t want purchasing to be fraught with conflict of interest, inadequate cash controls, idle funds to be in low interest accounts, and risky investments to be tolerated. Of course, the Council is accountable for breaches of this sort as well as for failures in results.
Assuming, however, that the association has a chief executive officer, the management of fiscal affairs -- just as the management of programs -- is done by staff. The Council’s job is not fiscal management, but the governance of fiscal management.
In my construction of governance, the Council’s job is not to do, so much as to define. In the case of fiduciary duty, the Council’s defining task concerns the nature and level of fiscal prudence expected of the chief executive. Beyond that, the Council’s responsibility is to monitor data to ensure these thresholds are being realized. The combination of, first, defining prudence in policy language plus, second, systematically monitoring it is the path to fulfilling the Council’s fiduciary duty.
A Council can only establish ends policies in a long term, prescriptive way after considerable input and study. All of the “how to” or means questions must be left to its chief executive officer, provided the CEO operates within policy boundaries or limits of acceptability set by the Council. Not only is this uncommon approach succinct in application, but it’s also highly empowering.
These ends and limits on means are developed by the Council first with a broad brush, with further details added as needed. The Council empowers its CEO to achieve any reasonable interpretation of the ends as long as he or she operates within any reasonable interpretation of the limits on means. The wording of the broadest brush stroke used to limit means disallows unethical and imprudent actions.
To further define departures from fiscal responsibility that the Council would find unacceptable, it can seek expert assistance, perhaps from its auditing firm or a qualified Council member. As the Council goes on to put a finer point on its initial, very general proscription, it may determine that “imprudent” activities include falling below certain liquidity levels, projecting revenues too liberally, maintaining cash controls that fail to meet auditor acceptance, making purchases greater than certain amounts without written cost confirmations, granting unbounded personnel access to funds and so on.
Working from the most inclusive concept makes it unnecessary for the Council to think of every possible fiscal action of malfeasance. Behaviors missed in the detailed proscriptions are likely covered by the broader concept, though obviously with a “larger net.” The larger net, however, is quite sufficient to prevent or expose every instance of fiscal imprudence I have heard of. (For example, from the journals of an infamous recent Canadian hospital fiasco, ponder the effectiveness of a broad prohibition like, “no receivables will be valued at full face amount unless competent, disinterested opinion would consider the probability of recovery to be at least 90 percent.”)
One difference between my recommended approach and the conventional wisdom is that the Council creates criteria of performance before the fact rather than examining documents and reports after the fact with no criteria in hand. Subsequently; at a regular frequency determined by the Council, Council members receive whatever information illuminates the degree of performance on these indices. Monitoring becomes a rigorous, yet succinct, comparison of data against criteria. This makes the process easier and more reliable, for Council members know what they are looking for.
Governing proactively by using carefully crafted policies produces more cohesive accountability, fiscal and otherwise, without the unwanted side effect of disempowering staff that results from the time-honoured approval process. The CEO knows clearly what is to be achieved and avoided. He or she is not subjected to shoot-from-the-hip comments and queries every time budgets and reports are reviewed. With respect to fiscal operations, the Council will have answered the question “what practice, method, or circumstances would we not approve.” The only criteria binding on the CEO will have been proactively, explicitly imposed by the full Council. The criteria are never reactively, implicitly imposed by the Council or imposed in any way by a treasurer, finance committee or single insistent Council member.
In fact, much of what has passed for fiduciary responsibility is a structure based on comfort (having a treasurer or finance committee) and procedure (certain items are reviewed first by one group, then by the Council) rather than substance (criteria are debated and decided; performance is compared to criteria). The substance of fiscal prudence -- not just the sequential approval of fiscal plans and actions -- under the new governance will be spelled out clearly. This would be a new experience for almost all Councils. Clearly crafted fiscal criteria would be available not only as a management instruction, but as a set of openly expressed Council values that can be questioned, tested and modified at will.
In summary, the Council bears a crucial fiduciary accountability for financial management. But its most reliable method of fulfilling this duty is not through piecemeal, part-time involvement, but through control over financial management values. Its most responsible discharge of that duty is to:
• define the boundaries that separate fiscal property from impropriety;
• affix unambiguous, absolute and unimpeded accountability for performance upon the chief executive;
• rigorously and systematically monitor (not tinker with) relevant data to assure achievement has occurred.
Simple as these actions may seem, they are not supported by traditional governance nor can they be tacked on to conventional Council operation. They require a full paradigm shift in the whole of governance theory and practice.
John Carver, author of Councils that Make a Difference, is currently completing books on corporate Councils and college Councils with co-author Miriam Maybeu.
GOVERNING COUNCILS COST MONEY TOO
by John Carver
Councils are often unaware that they are not only “leadership centers” but cost centers as well. The simple fact is that Councils cost money. This is true of all Councils, of course, but I will limit my focus here to governing Councils of nonprofit organizations (and, to some extent, governmental organizations, such as public schools).
In my work with thousands of such Councils over the past several years, I have noticed four distinct levels at which Council costs can be considered. Virtually all Councils are aware of the first level; virtually none seem cognizant of the fourth. How Councils spread out between those extremes seems a reflection of their sophistication in the governance process.
Taken in inverse order of their importance to the organization, the four levels of Council costs are:
1. Wasted time. The first level consists of the unqualified (and often unquantifiable) cost of assembling a group of busy people or otherwise making demands on their time. Council members’ time is not free, though nonprofit agencies traditionally make no payment for it. Consequently, Council members or their employers must bear these costs. The spirit of community service often keeps these costs from being discussed. Wasted meeting time, starting late, meetings that accomplish little and meetings to deal with avoidable emergencies all silently remind Council members that there is a cost being borne. Though the cost to the agency is near zero, this is the cost Council members experience most pointedly.
2. Meeting expenses. Costs associated with meetings include coffee, mailings, photocopies, meeting rooms and conference calls. Other costs may included plaques, Council notebooks and other tangible items. The costs of level two are very visible and tend to be similar in nature to the kinds of costs Council members deal with in their daily lives. Except for the smallest of agencies, level two costs - in a relative sense - ordinarily amount to pocket change. Councils that deal regularly, even conscientiously, in trivia get stuck at this level of Council cost awareness even though costs to the agency are small.
3. Staff time. The magnitude of level three costs are a substantial leap above level two. They include the costs in staff time for the maintenance of regular Council operation as well as for the Council’s special questions and demands. Even Council monitoring of executive performance exacts a toll in staff costs.
Councils can easily forget that requesting information from staff costs money. They can overlook the need to be conservative about involving staff in preparing reports, staffing committees for providing informational programs for the Council.
It is not that the Council hasn’t the right to do such things -- indeed, it has the obligation to obtain information for monitoring and for making decisions. But, pulling staff away from the core purpose of the organization is a costly action that must be considered carefully. Unnecessary committee work, willy-nilly monitoring and report-gathering and causing the executive to invest time in playing politics with Council members are common occurrences in traditional Council operation.
Organizations rarely trace such expenses. Further, since staff are often inappropriately treated as a fixed cost, Council and management alike can fail to recognize the extent of level three costs. Though the figures are necessarily vague, it is not uncommon in, say, a $2 million agency to find these hidden costs pushing toward six figures! Ironically, Councils that show a lot of “responsible” concern about level two costs are often spend-thrifts in running up the costs of level three.
4. Costs resulting from activities inconsistent with the organization’s purpose. Unlike the preceding levels, level four costs are difficult if not impossible to quantify. Yet they constitute far and away the most damaging source of cost. Level four costs are the result of inadequate deliberation, specification and subsequent evaluation of organizational purpose. For example, if we find that our kids are being inadequately educated or educated in an inappropriate array of skills, no amount of operating efficiency redeems the error. It makes little sense to do the wrong things efficiently.
Yet, it takes little observation of nonprofit Councils to see that they give little attention to purpose -- especially purpose with a long-term perspective. Even when Councils appear to attend to purpose, they commonly confuse ends with means. That is, they will debate about services, programs or curricula instead of desired outcomes and intended recipients. Service, no matter how high in quality and how well intended, is not what purpose is about. Purpose must directly address what good is to occur, for which needs or people, at what cost.
Strategic leadership about the very reason for being in business is the forgotten topic. The cost is incalculable.
So, it is at level four that any attempt to transform governance must be made. Anything less is an exercise in getting better at the wrong things, at conserving the insignificant losses. Governing Councils that spend their time learning to read budgets, to write personnel policies, to do staff work or even to engage in planning in the usual sense are making such an error. Councils working assiduously to curb costs in levels two and three while ignoring the enormity of level four are misplacing woefully what otherwise would have been a commendable sense of responsibility.
Reaching for “ROG”
ROI, or return on investment, and “bang for the buck” are terms familiar to us all. There is no mystery about the concept of return, though nonprofits rarely make use of it. A common flaw of nonprofit management is the equation of cost control with good management. That principle operates at odds with the principle of maximizing return, since everyone is better off if some costs are not minimized.
With respect to Councils, it is important to remember that, first, Councils already incur considerable cost to their agencies and, second, Councils have immeasurable effects on the future of the agencies they govern. This means that responsible governance must strive for as good a return on these governance costs as possible. And some times that calls for raising such costs, not lowering them, particularly costs of the level two variety. An example is the potential payoff when level two costs are allowed to rise in order to have a retreat or to retain help in enhancing the governance process itself.
Moreover, it is not inconsequential to individual Council members that better governance either reduces the burden of level one costs or, just as comforting, increases the effect of the cost being endured.
Most Council members have an understandable need to have as much legitimate effect as possible for the time put in; better governance yields such a return.
Governance is both costly and potentially powerful. Ironically, there is an inverse relationship between the obviousness of Council cost and the magnitude of that cost. Only the most trivial Council costs are easily visible, and so frequently seduce responsible Council members into solving the wrong problems. The really large costs are those caused by inadequate “purposing.” Giving appropriate attention to this most flagrant of Council costs, however, requires a new approach to the Council’s job.
Governance is overdue for a paradigm shift, one that taps Council wisdom for ends more than means, for large issues more than small and for long-term issues rather than short-term ones. The conventional wisdom about governance is simply inadequate for the task.
Mr. John Carver, president of Carver Governance Design Inc., is a management theorist and consultant. He has published his redesign of the governance function in his book, Councils that Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations (Jossey-Bass San Francisco, 1990).