Striking the right balance

When I carry out board effectiveness or governance reviews there are often concerns about striking the right balance between the roles of management and boards and ensuring that the right dialogue and knowledge flows exist between the two levels. Getting the balance right in these areas?has long been seen as two of the most important and also most challenging aspects of non-profit governance.

Earlier this year I carried out a LinkedIn poll asking, “Do you think the non profits you are involved with strike the right balance between the work of the board and the work of management?”. The results were not unexpected.

I spoke with a number of the respondents. The ones that felt the balance was “always right” had regular reviews of their governance and board effectiveness and the relationship between the board and management was marked with frankness and candour. Those is the “mostly” category had realised that there were many easy wins and low hanging fruit where small changes could lead to incremental gains. Those in the rarely or never category had boards that either were over involved in the detail or where they had too little oversight. In most cases it was because they did not really understand where and how they should focus. Sometimes their views were tainted from past experience where they may have been involved in an organisation where something had gone wrong. In other cases, their experience was as executive board members in the private sector where they had roles that encompassed both high level governance and involvement in operational management.?

There is obvious commonality between the roles of the board in all sectors, but non-profit boards are primarily made up of non-executives, who are not usually involved with management. There are also different perspectives of ownership, contribution and management.

For example, the board members of a non profit do not own what they work for nor do they represent an owner or founder. The individuals guide, support and influence with the key aim of acting in the best interest of the organisation overall rather than a constituency or grouping. Importantly, this should not fetter those working for the organisation or those that it is working for, nor should it deny the flexibility that is needed if activities and services are to adapt to changing local, national and international needs.

There is no stereotyped one size fits all answer, non profits differ in size and in the stages of their life cycle and small non profits often cannot employ staff and so volunteer board members have to take on management roles. I have been a?board member of a small non profit where I have had to prepare the budgets myself and I am presently a board member of others where I would not go anywhere near budget preparation.??

In most larger non profits the board has had the foresight to appoint professional (paid) management to manage the organisation. This sometimes causes a dilemma and a non-profits board member's position contrasts to that of the non-executive directors of a company in the private sector who share their legal responsibilities with their executive colleagues. Private sector boards are usually unitary boards, and this differs from the board and management structure in the non-profit sector where the governing board members are not usually involved in the day-to-day management.

In some ways, the greater the competence and professionalism of management, the greater the challenge in understanding how to get the right balance between governance and management. Non-Executives must properly discharge their duties and not be seen to simply rubber stamp, but at the same time they should not become over involved in operational management to the detriment of their critical perspective.

The board should set values and standards, and ensure that its obligations to its stakeholders are fully understood and met. Whilst boards should not micromanage, they should review management performance, support and guide them, and also constructively challenge each other and management and actively contribute to the development, and oversee the execution, of the strategy.

Boards are facing an increasing range of challenges. For example, the regulatory framework increasingly relies on judgement rather than centrally prescribed solutions. Regulators and other stakeholders want to ensure that arrangements for governance should be robust enough to support this and to ensure good stewardship,

In addition, corporate governance issues in the private, public and voluntary sectors have heightened public awareness about appropriate behaviour, conflicts of interest and the need for transparency and greater accountability. It is important to recognise that even perceptions of poor behaviour and conflicts of interest can be damaging.

The boards’ role includes the exercise of stewardship responsibilities to ensure that resources are deployed in the best way to meet objectives, bearing in mind present as well as future needs. Boards must provide leadership within a framework of prudent and effective controls which enable risk to be assessed and managed. At the same time, they need to be catalysts for change and strategists to ensure that the organisation remains focused on both managing the present and trying to deliver the future plan.

Delegation not abdication

It is the reaction to their understanding of their roles and concerns about their responsibilities that often results in non profit board members becoming over-involved in operational management to the detriment of their critical perspective.

Sometimes things do go wrong and boards have to roll up their sleeves but I find that boards often swing between the two ends of the spectrum. Either there is too little oversight or over involvement in day to day management. Usually the mantra should be 'Govern more - manage less'.

Board members should delegate where possible, but in accepting their positions board members take on duties and responsibilities that they cannot abdicate or circumscribe but only share with their fellow board members, each bringing their own special qualities or skills. Their responsibility is a collective one, which is more readily satisfied if there is the requisite experience, time commitment and involvement present around the table as is consistent with the effective working of the group. If the board believes that the requisite skills do not exist, it should re-evaluate the board’s composition. However, it is important to recognise that existing skills within both the board and executive management team should be complementary and not necessarily duplicated.

The running of the organisation becomes a joint endeavour requiring board members to remain clear about the terms on which they have delegated authority to committees and management and requiring management to assist the board by presenting properly prepared, researched and summarised issues to them to help them in their task.

Empowerment and accountability

There is recognition of the need for boards to empower senior management and for management to empower staff and other partners. This empowerment is important, but empowerment must be balanced with accountability. Too often there is unwarranted expectation that things are being done as they should be done and that good practice is being followed.

True empowerment requires an enabling environment, and this means that the organisation must ensure that those it is trying to empower (the board, committees, senior management staff and partners) have the core competencies and skill base to properly use relevant tools, methodologies and policies that must support both accountability and devolved decision making.?

True empowerment is only possible when suitably experienced individuals take decisions within their competence and adhere to an agreed framework that does not require constant reference to or follow up from others. In practice, this is only effective when individuals both follow and rely on agreed policies and procedures that set the parameters and framework for decision making. True and effective empowerment needs three components – responsibility, authority and accountability. As organisations grow and expand there will be increased delegation of activities or tasks and all three components need to be considered.?

The correct balance will be achieved only when individuals or teams have a clear understanding of responsibilities, the authority necessary to fulfil these responsibilities and the accountability for the consequences of what they have done or failed to do. This accountability is required not just from management but also from boards.

Getting the balance right is the challenge. While the board holds its brief to remain engaged and provide the required oversight, board members should take care to avoid over-involvement in the executive function. The board’s role is wide and encompasses many different issues that change and evolve over time. No board member should take for granted that established procedures, services and protocols are appropriate for the needs of today and tomorrow. It is by striking the right balance that boards can best fulfil their obligations and make the greatest contribution. It is in this stance that their greatest value lies as they create and hold a space that is their true support to management and delivers on what is needed from the board.