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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
    • These materials were intended to stimulate a discussion among National Assembly members on the topic of effective board governance. Topics covered included:
    • Board governance framework and perspectives
      • Key challenges to maximizing board contributions
      • Actionable ideas for improving the performance of your board
    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
      • Board governance research and framework
      • Survey and interview results
      • Common challenges and lessons learned
  • 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
      • How important is a high-performing board?
      • What are the characteristics of a high-performing board?
      • What are the best practices in building a high-performing board?
    Key questions
      • Interviews with board members and CEOs of Worth Magazine Top 100 Nonprofits
      • Interviews with McKinsey nonprofit client teams
      • Literature review and assessment
    Methodology
      • Report with lessons learned and example practices
      • Set of promising practices to jumpstart board performance
      • Board self-assessment tool
    End products
  • 6. THE DYNAMIC NONPROFIT BOARD FRAMEWORK Shape mission and strategic direction Monitor and improve performance Ensure leadership and resources
      • Ensure quality performance across 3 key board roles
      • Monitor external and internal environment to highlight areas for board attention
    Environment
      • Develop set of enabling practices around board composition, size structure, and processes
    Enablers
  • 7. 3 KEY ROLES ENCOMPASS NINE DETAILED RESPONSIBILITIES
      • Shape the mission and vision
      • Engage actively in strategic decision making and policy decisions
    • Select, evaluate, and develop the CEO
    • Ensure adequate financial resources
    • Provide expertise and access for organizational needs
    • Enhance reputation of organization
    • Oversee financial management and ensure appropriate risk management
    • Monitor performance and ensure accountability
    • Improve board performance
    Shape mission and strategic direction Monitor and improve performance Ensure leadership and resources
  • 8. ADDITIONAL LESSONS LEARNED FROM OUR RESEARCH
      • 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
      • 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
      • Invest significant time in board self-evaluation and continuous improvement
      • Sweat the little things: good meeting agendas, open communication, having fun
  • 9. CONTENTS
      • Board governance research and framework
      • Survey and interview results
      • Common challenges and lessons learned
  • 10. OVERVIEW OF SURVEY RESPONSES
    • E-mailed electronic survey to 70 member organizations
    • 35 individuals responded
    • 29% of respondents- board members, 63% CEOs, 8 % Other managers
    • Average board size – 27 (minimum of 7, maximum of 71)
    • 86% have an Executive Committee (Average size – 9)
    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
      • Areas of strong performance
      • Engage actively in strategic decision making and policy decisions
      • Select, evaluate, and develop the CEO
      • Enhance reputation of organization
      • Provide expertise and access for organizational needs
      • Oversee financial management and ensure appropriate risk management
    • Areas in need of development
    • Shape the mission and vision
    • Ensure adequate financial resources
    • Monitor performance and ensure accountability
    • Improve board performance
  • 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
      • Overall 92% of members feel that their boards’ provide an appropriate level of strategic guidance without infringing on the role of management
      • Result potentially driven by the fact that 79% have board committees focused on strategic priorities and 58% have robust strategic plan*
  • 14. BOARDS ALSO EFFECTIVELY ENGAGING IN CEO EVALUATION Members use a variety of review processes . . .
      • “ Board conducts an annual review based upon outcomes of the organization”
      • “ The CEO writes an annual plan and meets a minimum of 4 times a year with the committees around the performance plan”
      • “ To date, we’ve not had a formal performance review of the CEO, but are planning to institute one for next year”
      • 75% of members have pre-agreed written criteria
      • 33% of members use 360 ° evaluation processes
    . . . leading to a set of follow-up activities . . .
      • “ Results are incorporated into ongoing monitoring”
      • “ Mentoring, training as needed . . .”
      • “ Annual progress review . . . is reflected in salary revisions”
    . . . and led by various members of the organization
      • “ The executive committee is responsible for CEO reviews”
      • “ Review done by Chairman, Chair Elect, Chair Emeritus and Chair of HR committee”
      • “ The Executive Committees and the Executive Compensate Committee have full responsibilities in this arena”
      • “ The board chair does the performance review”
      • “ Done by officers and reported to board”
  • 15. MEMBERS SUCCESSFULLY TAP INTO VARIETY OF BOARD EXPERTISE… Methods of tapping into expertise
      • “ We maintain a detailed list of board members’ individual expertise as well as interests”
      • “ Members recruited according to expertise/influence matrix, assigned to committees / task forces accordingly”
      • “ We tap board member expertise through [the appropriate] committee”
      • 83% of members have a staff point person for managing board/staff relationships
      • 79% use a diversity grid for mapping out areas of expertise
      • “ Through a phone call.”
    Areas of greatest assistance
      • Legal
      • Legislative
      • Human services issues
      • Program guidance
      • Media
      • Investment
      • Diversity
      • Networks/connections
      • Writing contributions for publications
      • Public speaking
  • 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
      • “ We use certain board members with asks for grants. We ask all board members to appeal to their employers for just about anything”
      • “ We asked our board members to connect with Congress on [an] issue and it was very successful”
      • “ Each board member brings a network of contacts and previous involvement. We seek to discover those connections and use them”
      • “ [We are] just beginning to take advantage of this . . .”
      • 83% of members have boards that connect their organizations to public, corporate, foundations, or other actors
      • 83% of members have board members that represent the organization and its interests at external meetings
  • 18. MEMBERS REPORT STRONG BOARD INVOLVEMENT IN RISK MANAGEMENT ROLE Boards are confident in their understanding of potential risks . . .
      • 88% of boards have a list of closely watched financial metrics and ratios
      • 96% of boards are aware of their organization’s financial exposure
      • 83% of boards have a clear understanding of the nature of the organizations’ liability and reputational risks and have strategies to mitigate them
    . . . 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
      • Areas of strong performance
      • Engage actively in strategic decision making and policy decisions
      • Select, evaluate, and develop the CEO
      • Enhance reputation of organization
      • Provide expertise and access for organizational needs
      • Oversee financial management and ensure appropriate risk management
    • Areas in need of development
    • Shape the mission and vision
    • Ensure adequate financial resources
    • Monitor performance and ensure accountability
    • Improve board performance
  • 20. SURVEY RESULTS INDICATE POTENTIAL FOR IMPROVEMENT ON BOARD ROLE IN DRIVING MISSION AND VISION Board performance on shared understanding of the mission . . .
      • “ 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
    . . . mirrors their use of tactics to connect the board to its mission . . .
      • 42% have a mechanism for board members to participate in program activities
      • 42% of members periodically focus meetings solely on mission
      • “ 63% explicitly discuss decisions as they pertain to mission and develop “case law” for future decisions
    . . . and leads to significant vision issues
      • “ Our board fails to set high expectations”
      • “ We need the board’s help with strategic visioning”
      • “ [Our board needs] to help ‘raise the bar’ by asking us tough questions on key issues”
      • “ 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.”
  • 21. MEMBERS REPORT DISSATISFACTION WITH BOARD FUNDRAISING PERFORMANCE There are mixed fundraising expectations . . .
      • “ Everyone is expected to contribute. [There is a] Formal solicitation with specific ask”
      • “ There currently is no expectation of financial contribution . . . influenced by the reading some have of the carver model”
      • “ No current explicit financial contribution levels are required . . . although a total board fundraising goal is set”
    . . . and few organizations have put processes in place to encourage it . . .
      • 21% set individual board member fundraising goals
      • 38% provide board with training on fundraising
      • “ We provide every member with a document that describes board member responsibilities, including financial contribution expectations”
    . . . but most are disappointed by board fundraising performance
      • 77% of respondents indicated a desire to improve board’s fundraising
  • 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!” "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
      • “ Key areas of the strategic plan are monitored. Balanced scorecard used. Specific goals are set in finance, resource development, and HR”
      • “ [We monitor] through a variety of standing committees”
      • “ [We monitor] mostly by adherence to strategic plan goals”
      • “ The CEO who is in charge of operations is evaluated”
    42% of boards play an active role in measuring program performance
      • “ They focus on ends rather than means – they don’t get involved in measuring individual programs”
      • “ We don’t do this”
      • “ They review the data provided by management”
      • “ Our board’s role here is limited”
      • “ We review our success regularly with the board, but not at a huge level of detail”
  • 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
      • “ Our board doesn’t hold our feet to the fire”
      • “ The board is not really engaged in this”
      • “ Fortunately for the organization I’ve been self-motivated and driven for the organization for over 10 years”
      • “ This would impact incentives, taken into consideration with compensation”
      • “ [The board] can vote to terminate a program”
      • “ This has not yet happened, but the policies call for a corrective action plan”
      • “ Usually staff has already prepared some recommendation for change or improvement”
      • “ We have arranged for executive coaching”
  • 25. SURVEYS ALSO INDICATE BOARDS SPEND LIMITED TIME ON SELF-EVALUATION
      • 35% of organizations evaluate individuals and overall board performance
        • 21% of organizations give individual board member feedback
        • 67% have a board development and evaluation committee
        • 46% use an assessment tool for evaluating board performance at a regular interval
      • Those organizations that do evaluate board performance use a variety of methods
        • “ We evaluate at every meeting in writing”
        • “ Individuals are evaluated each year by the Board Governance Committee based on engagement, level of engaged, funds raised and contributed, added value”
        • “ Periodically the board as a whole does a self-evaluation”
  • 26. CONTENTS
      • Board governance research and framework
      • Survey and interview results
      • Common challenges and lessons learned
  • 27. SEVERAL CHALLENGES WERE RAISED WITH REGARD TO ENABLING EFFECTIVE BOARD PERFORMANCE . . . but many had suggestions for how to improve Several boards identified challenges . . .
    • “ Setting regular monthly committee meetings and making them accessible by phone”
    “ Time and expense of travel”
    • “ One solution is regular communications using multiple vehicles”
    • “ We have mentors and mentoring to help members grow”
    “ The Board is too big” “ Achieving the balance between clout and local constituencies”
    • “ Highest clout on executive committee, special constituents on board committees”
    • “ Be direct and transparent”
    • “ The non-financial and financial expectations of new board members are shared during the nominating process and during their orientation”
    “ Leveraging people in the right way”
    • “ Keep matrix of board make-up that informs selection of new board members”
    “ [Achieving] diversity of voice, gender, ethnicity”
    • “ By publishing a calendar of meetings and events, people will make every effort to incorporate them into their schedules”
    “ 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? . . .”