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Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
Dynamic_Nonprofit_Board.ppt
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Dynamic_Nonprofit_Board.ppt

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  • LAN-ZZT937-20031004-5310-ZZT
  • LAN-ZZT937-20031004-5310-ZZT
  • LAN-ZZT937-20031004-5310-ZZT
  • LAN-ZZT937-20031004-5310-ZZT
  • Transcript

    • 1. National Assembly ELI: Dynamic Nonprofit Board NATIONAL ASSEMBLY OF HEALTH AND HUMAN SERVICE ORGANIZATIONS Presentation document November 14, 2003
    • 2. BACKGROUND ON BOARD GOVERNANCE MATERIALS Organizations could use the materials to stimulate a conversation around current board performance and future priorities. To that end, we have also developed a board self-assessment survey to help boards assess their current performance against best practices . A copy of the report is available at www.mckinsey.com/practices/nonprofit/ourknowledge <ul><li>These materials were intended to stimulate a discussion among National Assembly members on the topic of effective board governance. Topics covered included: </li></ul><ul><li>Board governance framework and perspectives </li></ul><ul><ul><li>Key challenges to maximizing board contributions </li></ul></ul><ul><ul><li>Actionable ideas for improving the performance of your board </li></ul></ul>The following materials were prepared to facilitate a session on board governance for the National Assembly’s Executive Leadership Institute. Materials were based on findings from the McKinsey & Company report: The Dynamic Nonprofit Board: Lessons from High-performing Nonprofits . In addition, the results of surveys and interviews with members of the National Assembly as well as input from McKinsey teams serving nonprofit organizations on this topic were incorporated.
    • 3. CONTENTS <ul><ul><li>Board governance research and framework </li></ul></ul><ul><ul><li>Survey and interview results </li></ul></ul><ul><ul><li>Common challenges and lessons learned </li></ul></ul>
    • 4. BUILDING EFFECTIVE BOARDS OFTEN ARISES AS A KEY CLIENT CONCERN “ The motion has been made and seconded that we stick our heads in sand” “ Perhaps it would help if I go over it one more time”
    • 5. IN RESPONSE, WE LAUNCHED A RESEARCH PROJECT FOCUSED ON 3 MAJOR QUESTIONS <ul><ul><li>How important is a high-performing board? </li></ul></ul><ul><ul><li>What are the characteristics of a high-performing board? </li></ul></ul><ul><ul><li>What are the best practices in building a high-performing board? </li></ul></ul>Key questions <ul><ul><li>Interviews with board members and CEOs of Worth Magazine Top 100 Nonprofits </li></ul></ul><ul><ul><li>Interviews with McKinsey nonprofit client teams </li></ul></ul><ul><ul><li>Literature review and assessment </li></ul></ul>Methodology <ul><ul><li>Report with lessons learned and example practices </li></ul></ul><ul><ul><li>Set of promising practices to jumpstart board performance </li></ul></ul><ul><ul><li>Board self-assessment tool </li></ul></ul>End products
    • 6. THE DYNAMIC NONPROFIT BOARD FRAMEWORK Shape mission and strategic direction Monitor and improve performance Ensure leadership and resources <ul><ul><li>Ensure quality performance across 3 key board roles </li></ul></ul><ul><ul><li>Monitor external and internal environment to highlight areas for board attention </li></ul></ul>Environment <ul><ul><li>Develop set of enabling practices around board composition, size structure, and processes </li></ul></ul>Enablers
    • 7. 3 KEY ROLES ENCOMPASS NINE DETAILED RESPONSIBILITIES <ul><ul><li>Shape the mission and vision </li></ul></ul><ul><ul><li>Engage actively in strategic decision making and policy decisions </li></ul></ul><ul><li>Select, evaluate, and develop the CEO </li></ul><ul><li>Ensure adequate financial resources </li></ul><ul><li>Provide expertise and access for organizational needs </li></ul><ul><li>Enhance reputation of organization </li></ul><ul><li>Oversee financial management and ensure appropriate risk management </li></ul><ul><li>Monitor performance and ensure accountability </li></ul><ul><li>Improve board performance </li></ul>Shape mission and strategic direction Monitor and improve performance Ensure leadership and resources
    • 8. ADDITIONAL LESSONS LEARNED FROM OUR RESEARCH <ul><ul><li>While effective boards perform a comprehensive set of roles, they recognize the risk of being mediocre at everything; pick your spots carefully to allot valuable time where needed </li></ul></ul><ul><ul><li>Recognize performance management as one of the board's core roles on par with strategy-setting and fundraising; take on the challenge of leading without stepping on staff toes </li></ul></ul><ul><ul><li>Invest significant time in board self-evaluation and continuous improvement </li></ul></ul><ul><ul><li>Sweat the little things: good meeting agendas, open communication, having fun </li></ul></ul>
    • 9. CONTENTS <ul><ul><li>Board governance research and framework </li></ul></ul><ul><ul><li>Survey and interview results </li></ul></ul><ul><ul><li>Common challenges and lessons learned </li></ul></ul>
    • 10. OVERVIEW OF SURVEY RESPONSES <ul><li>E-mailed electronic survey to 70 member organizations </li></ul><ul><li>35 individuals responded </li></ul><ul><li>29% of respondents- board members, 63% CEOs, 8 % Other managers </li></ul><ul><li>Average board size – 27 (minimum of 7, maximum of 71) </li></ul><ul><li>86% have an Executive Committee (Average size – 9) </li></ul>Who responded . . .
    • 11. NATIONAL ASSEMBLY SURVEYS INDICATE MEMBERS FEEL THEY ARE NOT TAPPING BOARDS’ FULL POTENTIAL Do you feel you are tapping board’s potential? Yes No Why or why not? “ We haven’t demanded it.” “ We constantly need better definition and communication of expectations.” “ We have relied excessively on the outstanding performance of the CEO.”
    • 12. SUMMARY OF RESULTS HIGHLIGHT RELATIVE AREAS OF BOARD STRENGTH AND OPPORTUNITIES FOR DEVELOPMENT <ul><ul><li>Areas of strong performance </li></ul></ul><ul><ul><li>Engage actively in strategic decision making and policy decisions </li></ul></ul><ul><ul><li>Select, evaluate, and develop the CEO </li></ul></ul><ul><ul><li>Enhance reputation of organization </li></ul></ul><ul><ul><li>Provide expertise and access for organizational needs </li></ul></ul><ul><ul><li>Oversee financial management and ensure appropriate risk management </li></ul></ul><ul><li>Areas in need of development </li></ul><ul><li>Shape the mission and vision </li></ul><ul><li>Ensure adequate financial resources </li></ul><ul><li>Monitor performance and ensure accountability </li></ul><ul><li>Improve board performance </li></ul>
    • 13. MEMBERS REPORT THEIR BOARDS DRAW AN APPROPRIATE LINE BETWEEN STRATEGIC AND TACTICAL INVOLVEMENT * Includes situation analysis, with peer review, threats, opportunities, sector overview “ The board is not likely to cross into management as it adheres quite clearly to its own policies for board/ staff interactions” Tactical/operational “ If the board has a fault in this area, it is not being as fully engaged as it could be in strategic guidance” “ Our board is very operational and the staff pulls the board to operational issues because of our ‘way of work’ with committees” “ This is something we monitor closely. We are candid when we feel the line has been crossed” Strategic <ul><ul><li>Overall 92% of members feel that their boards’ provide an appropriate level of strategic guidance without infringing on the role of management </li></ul></ul><ul><ul><li>Result potentially driven by the fact that 79% have board committees focused on strategic priorities and 58% have robust strategic plan* </li></ul></ul>
    • 14. BOARDS ALSO EFFECTIVELY ENGAGING IN CEO EVALUATION Members use a variety of review processes . . . <ul><ul><li>“ Board conducts an annual review based upon outcomes of the organization” </li></ul></ul><ul><ul><li>“ The CEO writes an annual plan and meets a minimum of 4 times a year with the committees around the performance plan” </li></ul></ul><ul><ul><li>“ To date, we’ve not had a formal performance review of the CEO, but are planning to institute one for next year” </li></ul></ul><ul><ul><li>75% of members have pre-agreed written criteria </li></ul></ul><ul><ul><li>33% of members use 360 ° evaluation processes </li></ul></ul>. . . leading to a set of follow-up activities . . . <ul><ul><li>“ Results are incorporated into ongoing monitoring” </li></ul></ul><ul><ul><li>“ Mentoring, training as needed . . .” </li></ul></ul><ul><ul><li>“ Annual progress review . . . is reflected in salary revisions” </li></ul></ul>. . . and led by various members of the organization <ul><ul><li>“ The executive committee is responsible for CEO reviews” </li></ul></ul><ul><ul><li>“ Review done by Chairman, Chair Elect, Chair Emeritus and Chair of HR committee” </li></ul></ul><ul><ul><li>“ The Executive Committees and the Executive Compensate Committee have full responsibilities in this arena” </li></ul></ul><ul><ul><li>“ The board chair does the performance review” </li></ul></ul><ul><ul><li>“ Done by officers and reported to board” </li></ul></ul>
    • 15. MEMBERS SUCCESSFULLY TAP INTO VARIETY OF BOARD EXPERTISE… Methods of tapping into expertise <ul><ul><li>“ We maintain a detailed list of board members’ individual expertise as well as interests” </li></ul></ul><ul><ul><li>“ Members recruited according to expertise/influence matrix, assigned to committees / task forces accordingly” </li></ul></ul><ul><ul><li>“ We tap board member expertise through [the appropriate] committee” </li></ul></ul><ul><ul><li>83% of members have a staff point person for managing board/staff relationships </li></ul></ul><ul><ul><li>79% use a diversity grid for mapping out areas of expertise </li></ul></ul><ul><ul><li>“ Through a phone call.” </li></ul></ul>Areas of greatest assistance <ul><ul><li>Legal </li></ul></ul><ul><ul><li>Legislative </li></ul></ul><ul><ul><li>Human services issues </li></ul></ul><ul><ul><li>Program guidance </li></ul></ul><ul><ul><li>Media </li></ul></ul><ul><ul><li>Investment </li></ul></ul><ul><ul><li>Diversity </li></ul></ul><ul><ul><li>Networks/connections </li></ul></ul><ul><ul><li>Writing contributions for publications </li></ul></ul><ul><ul><li>Public speaking </li></ul></ul>
    • 16. … ALTHOUGH THE TYPES OF RECOGNITION BOARD MEMBERS RECEIVE FOR THEIR CONTRIBUTIONS VARIES CONSIDERABLY “ Satisfaction through participation in a premier nonprofit organization that is leading edge” “ Personal ‘thank you’ from the CEO and Chairman” “ Not much” “ Press releases in their home areas, installation at the national conference” “ . . . an opportunity to connect with an impressive board and staff” “ Years of service, committee chairs, president’s award, humanitarian award” “ National public recognition through publications and national organization meetings”
    • 17. MEMBERS HAVE ALSO BEEN LARGELY SUCCESSFUL IN LEVERAGING BOARD CONTACTS TO GAIN ACCESS <ul><ul><li>“ We use certain board members with asks for grants. We ask all board members to appeal to their employers for just about anything” </li></ul></ul><ul><ul><li>“ We asked our board members to connect with Congress on [an] issue and it was very successful” </li></ul></ul><ul><ul><li>“ Each board member brings a network of contacts and previous involvement. We seek to discover those connections and use them” </li></ul></ul><ul><ul><li>“ [We are] just beginning to take advantage of this . . .” </li></ul></ul><ul><ul><li>83% of members have boards that connect their organizations to public, corporate, foundations, or other actors </li></ul></ul><ul><ul><li>83% of members have board members that represent the organization and its interests at external meetings </li></ul></ul>
    • 18. MEMBERS REPORT STRONG BOARD INVOLVEMENT IN RISK MANAGEMENT ROLE Boards are confident in their understanding of potential risks . . . <ul><ul><li>88% of boards have a list of closely watched financial metrics and ratios </li></ul></ul><ul><ul><li>96% of boards are aware of their organization’s financial exposure </li></ul></ul><ul><ul><li>83% of boards have a clear understanding of the nature of the organizations’ liability and reputational risks and have strategies to mitigate them </li></ul></ul>. . . and actively manage their organizations’ risk exposure “ We consider safety, brand, image” “ [We have] open discussions with General Counsel present” “ We follow advice from the CEO and board members with expertise in that field” “ Board committees continually look at these issues, including financial, legal, and public reputation risks”
    • 19. SUMMARY OF RESULTS HIGHLIGHT RELATIVE AREAS OF BOARD STRENGTH AND OPPORTUNITIES FOR DEVELOPMENT <ul><ul><li>Areas of strong performance </li></ul></ul><ul><ul><li>Engage actively in strategic decision making and policy decisions </li></ul></ul><ul><ul><li>Select, evaluate, and develop the CEO </li></ul></ul><ul><ul><li>Enhance reputation of organization </li></ul></ul><ul><ul><li>Provide expertise and access for organizational needs </li></ul></ul><ul><ul><li>Oversee financial management and ensure appropriate risk management </li></ul></ul><ul><li>Areas in need of development </li></ul><ul><li>Shape the mission and vision </li></ul><ul><li>Ensure adequate financial resources </li></ul><ul><li>Monitor performance and ensure accountability </li></ul><ul><li>Improve board performance </li></ul>
    • 20. SURVEY RESULTS INDICATE POTENTIAL FOR IMPROVEMENT ON BOARD ROLE IN DRIVING MISSION AND VISION Board performance on shared understanding of the mission . . . <ul><ul><li>“ 46% of members have a board where EVERY director can summarize the mission of the organization, where it hopes to be in 5 years, and why it is an effective agent of change </li></ul></ul>. . . mirrors their use of tactics to connect the board to its mission . . . <ul><ul><li>42% have a mechanism for board members to participate in program activities </li></ul></ul><ul><ul><li>42% of members periodically focus meetings solely on mission </li></ul></ul><ul><ul><li>“ 63% explicitly discuss decisions as they pertain to mission and develop “case law” for future decisions </li></ul></ul>. . . and leads to significant vision issues <ul><ul><li>“ Our board fails to set high expectations” </li></ul></ul><ul><ul><li>“ We need the board’s help with strategic visioning” </li></ul></ul><ul><ul><li>“ [Our board needs] to help ‘raise the bar’ by asking us tough questions on key issues” </li></ul></ul><ul><ul><li>“ The board is reactive not proactive . . . I’m redefining everything and bringing it to the board for approval i.e., mission, vision, strategic plan, etc.” </li></ul></ul>
    • 21. MEMBERS REPORT DISSATISFACTION WITH BOARD FUNDRAISING PERFORMANCE There are mixed fundraising expectations . . . <ul><ul><li>“ Everyone is expected to contribute. [There is a] Formal solicitation with specific ask” </li></ul></ul><ul><ul><li>“ There currently is no expectation of financial contribution . . . influenced by the reading some have of the carver model” </li></ul></ul><ul><ul><li>“ No current explicit financial contribution levels are required . . . although a total board fundraising goal is set” </li></ul></ul>. . . and few organizations have put processes in place to encourage it . . . <ul><ul><li>21% set individual board member fundraising goals </li></ul></ul><ul><ul><li>38% provide board with training on fundraising </li></ul></ul><ul><ul><li>“ We provide every member with a document that describes board member responsibilities, including financial contribution expectations” </li></ul></ul>. . . but most are disappointed by board fundraising performance <ul><ul><li>77% of respondents indicated a desire to improve board’s fundraising </li></ul></ul>
    • 22. SURVEYS HIGHLIGHT ISSUE AROUND BOARD ROLE IN ENSURING ACCOUNTABILITY “ Our board is accountable to the organizations we serve” “ Members” “ We haven’t worked out a good board accountability strategy yet” “ To the persons served, their families, and their communities” “ We haven't done this” “ We have no shareholders. It is not a membership movement” Only 38% of members receive feedback directly from service recipients to the board “ To whom is your board accountable?” . . . “ Good question!” &quot;Unaccountable”
    • 23. SURVEYS INDICATE OPPORTUNITY TO IMPROVE LEVEL OF BOARD INVOLVEMENT IN PERFORMANCE MEASUREMENT ROLE . . . 71% of boards play an active role in measuring operations performance <ul><ul><li>“ Key areas of the strategic plan are monitored. Balanced scorecard used. Specific goals are set in finance, resource development, and HR” </li></ul></ul><ul><ul><li>“ [We monitor] through a variety of standing committees” </li></ul></ul><ul><ul><li>“ [We monitor] mostly by adherence to strategic plan goals” </li></ul></ul><ul><ul><li>“ The CEO who is in charge of operations is evaluated” </li></ul></ul>42% of boards play an active role in measuring program performance <ul><ul><li>“ They focus on ends rather than means – they don’t get involved in measuring individual programs” </li></ul></ul><ul><ul><li>“ We don’t do this” </li></ul></ul><ul><ul><li>“ They review the data provided by management” </li></ul></ul><ul><ul><li>“ Our board’s role here is limited” </li></ul></ul><ul><ul><li>“ We review our success regularly with the board, but not at a huge level of detail” </li></ul></ul>
    • 24. . . . SPECIFICALLY AROUND SETTING PERFORMANCE INCENTIVES Most boards address performance issues once raised… … but most do not take specific actions to encourage performance before an issue arises <ul><ul><li>“ Our board doesn’t hold our feet to the fire” </li></ul></ul><ul><ul><li>“ The board is not really engaged in this” </li></ul></ul><ul><ul><li>“ Fortunately for the organization I’ve been self-motivated and driven for the organization for over 10 years” </li></ul></ul><ul><ul><li>“ This would impact incentives, taken into consideration with compensation” </li></ul></ul><ul><ul><li>“ [The board] can vote to terminate a program” </li></ul></ul><ul><ul><li>“ This has not yet happened, but the policies call for a corrective action plan” </li></ul></ul><ul><ul><li>“ Usually staff has already prepared some recommendation for change or improvement” </li></ul></ul><ul><ul><li>“ We have arranged for executive coaching” </li></ul></ul>
    • 25. SURVEYS ALSO INDICATE BOARDS SPEND LIMITED TIME ON SELF-EVALUATION <ul><ul><li>35% of organizations evaluate individuals and overall board performance </li></ul></ul><ul><ul><ul><li>21% of organizations give individual board member feedback </li></ul></ul></ul><ul><ul><ul><li>67% have a board development and evaluation committee </li></ul></ul></ul><ul><ul><ul><li>46% use an assessment tool for evaluating board performance at a regular interval </li></ul></ul></ul><ul><ul><li>Those organizations that do evaluate board performance use a variety of methods </li></ul></ul><ul><ul><ul><li>“ We evaluate at every meeting in writing” </li></ul></ul></ul><ul><ul><ul><li>“ Individuals are evaluated each year by the Board Governance Committee based on engagement, level of engaged, funds raised and contributed, added value” </li></ul></ul></ul><ul><ul><ul><li>“ Periodically the board as a whole does a self-evaluation” </li></ul></ul></ul>
    • 26. CONTENTS <ul><ul><li>Board governance research and framework </li></ul></ul><ul><ul><li>Survey and interview results </li></ul></ul><ul><ul><li>Common challenges and lessons learned </li></ul></ul>
    • 27. SEVERAL CHALLENGES WERE RAISED WITH REGARD TO ENABLING EFFECTIVE BOARD PERFORMANCE . . . but many had suggestions for how to improve Several boards identified challenges . . . <ul><li>“ Setting regular monthly committee meetings and making them accessible by phone” </li></ul>“ Time and expense of travel” <ul><li>“ One solution is regular communications using multiple vehicles” </li></ul><ul><li>“ We have mentors and mentoring to help members grow” </li></ul>“ The Board is too big” “ Achieving the balance between clout and local constituencies” <ul><li>“ Highest clout on executive committee, special constituents on board committees” </li></ul><ul><li>“ Be direct and transparent” </li></ul><ul><li>“ The non-financial and financial expectations of new board members are shared during the nominating process and during their orientation” </li></ul>“ Leveraging people in the right way” <ul><li>“ Keep matrix of board make-up that informs selection of new board members” </li></ul>“ [Achieving] diversity of voice, gender, ethnicity” <ul><li>“ By publishing a calendar of meetings and events, people will make every effort to incorporate them into their schedules” </li></ul>“ Better attendance at board meetings. Greater participation in committees”
    • 28. CHALLENGE OF RECRUITING HIGH-PROFILE INDIVIDUALS WAS MOST OFTEN RAISED AND ADDRESSED “ Get the organization, corporation, or individual involved in one of our programs or program events” “ Identify an easily understood issue that resonates personally or intellectually with the member rather than try to explain the overall value of the organization” “ What seems to work is to treat it very seriously. Force [potential members] to do a due diligence on the org and examine whether they are truly committed” “ Also be direct and honest on expectations. Treat it like a business deal and they will understand that” “ . . . it appears to us that the best technique is to use local association leaders to identify, recommend and help recruit such persons” “ Get one or two high profile board members . . . have them recruit people they know” “ Having a CEO who attracts such persons” “ We've been successful where Board members have personal relationships with high-profile candidates” “ What strategies have been most effective? . . .” “ Who is best position to recruit successfully? . . .”

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