Good Practice Governance and other Not for Profit Leadership Myths
Garth Nowland-Foreman & Sandy Thompson
Over the last 25 years the team at LEAD have worked with hundreds and hundreds of not for profit leaders and board members in towns and cities across all the NZ regions. During that time, we have learnt some things about good governance, and not all of it is what you’d expect.
Most of the many books on governance don’t describe what actually happens in real live non-profits, but are more ‘heroic’ prescriptions, full of far-too-many impossible ‘shoulds’. Aspirations can be useful if they are just beyond our reach and encourage us to do better, but unrealistic expectations and myths just discourage and often mislead.
‘Culture-free’ models usually just reflect the dominant culture - or worse still, the culture of the country they were imported from.
Here are a few of the myths we come across and what we have found in real flesh-and-blood non-profit boards:
Myth #1: There is a model of good governance that all boards should follow
The reality is, despite numerous (competing) claims to have found the one true governance way, no one size fits all. How could we expect it to when every community in NZ is different, every organisation is different, and every board is different? One model cannot accommodate the range of cultures, missions, and demographic profiles of every organisation (Lyons, 2001; Steane, 2001, Cornforth, 2001 & 2003; Bradshaw, Hayday & Armstrong, 2007; Erakovic & McMorland, 2009; Chelliah, Boersma & Klettner, 2016; Hugh & Nowland-Foreman, 2018). And very few even acknowledge the changing governance requirements over an organisation’s life-cycle.
The most common ‘model’ actually practiced round the world and in NZ, the Community Management model, is pretty much ignored in the governance literature, because it contradicts common assumptions about what good (arms-length) governance should look like. It’s foolhardy to think that governance models born out of Westminster, and fine-tuned in the corporate boardrooms of the United States will work perfectly fine in Aotearoa. We need to find our own way, but the good news is that boards who discuss what type of board they need to be, who agree who should be responsible for what, and who adopt parts of a range of governance models that they find useful, practice governance very well (Nobbie & Brudney, 2003). We just need to give boards the confidence to do this, and abandon the search for the mythical holy grail of the one true governance model.
Myth #2: You need a skills-based board with ‘one-of-each’ on board
While we are not necessarily against having people with a range of skills on your board (lawyer, accountant, tinker, sailor), it’s a fundamental mistake to recruit on the basis of a ‘skills matrix’. When people are primarily recruited for their skills, it’s natural they think using their skills is what the board needs (some lawyering, accounting or tinkering). Because if people don’t know what to do, they do what they know (and often end up what is sometimes called ‘micromanaging’ – we prefer to call it tinkering).
A board’s most important job is as guardian of the vision, mission, and values of the organisation (Harlen & Saidel, 1994). The best boards make sure all decisions, choices and priorities are made based ruthlessly on the criteria of advancing the vision, mission and values. Anything else is a bonus. So it’s no surprise that the most important skills to have on board are soft skills of community connectedness, and commitment to the vision. Technical expertise adds flavour to the soup – but it shouldn’t be the base ingredient. After all, these technical skills can be found in lots of places and even bought, but you can’t buy ‘vision guardianship’ off the shelf. You need to be at the heart of the organisation to exercise that effectively.
Myth #3: Governance should always be arms-length from the actual work
Yes, if you are a multi-national corporation or are one of the few not for profits in NZ who are large enough to have a senior management team, this can make sense. But only 10% of NZ not for profits have any paid staff and even then the average staffing is 1.1 full-time equivalent people. For the other 90%, if the board is ‘hands-off’, the organisation will soon find no-one running it. It is also not desirable for the board to be too remote from an organisation. This breeds a board that is increasingly dependent on staff not only to recommend what the answer should be, but even what the question is. While managers are often concerned about a ‘micro-managing’ board, a disconnected or rubber-stamping board can be even more dangerous (and is most commonly behind corporate governance failures). US research (Swords & Bograd, 1996) has long indicated that the one risk factor associated with most forms of non-profit accountability lapses is the absence of an engaged, strong and independent board. While research in Australia (McDonald, 1993) found that board members who had some other (voluntary) role with an organisation were also more engaged and effective in their governance roles.
We need to get better at knowing which of the multiple hats we are wearing, rather than pressuring others to go out uncovered in the midday sun. Where there are staff there is no absolute dividing line between the roles of managers and of boards that applies in every situation. What’s more important is that all are clear and agreed who is responsible for what. Even then there are often grey areas in the real world. What is required is building a robust working partnership between staff and the board.
Myth #4: Conflicts of interest are bad and must be eliminated
The relevant law in NZ defines a ‘related person’ as someone within four degrees of separation. A rough rule of thumb is: if you have married them or it’s illegal to marry them, they’re likely to be a ‘related person’ under Conflicts of Interest rules. This can be hard to avoid in a place like NZ, and especially in small geographic communities or small communities of interest. Some use Conflict of Interest as a taiha to bash certain groups over the head, and denigrate whole communities. However, Conflict of Interest is neither good nor bad in itself - like gravity, it just describes a state of what is. It simply describes a situation where a decision-maker may face (or be seen to face) a conflict between what’s in their personal best interests (or the best interests of a ‘related person’) and the organisation’s best interests. The important thing is that we just manage any potential Conflict of Interest using the three simple requirements:
Declare it (transparency is the best defence against corruption)
Stay out of the decision you may be conflicted about
Keep any transaction of financial value neutral (at market rates) or to the advantage of the organisation.
This is much better than routinely removing good members from your board, or unnecessarily limiting the pool of potential candidates in smaller communities.
Myth #5: Conflicts and crises are signs of bad governance
Conflict and crisis are normal. Full-stop. They often reflect stages of growth or the life-cycle of an organisation. They may be completely generated by what is happening in the external environment. The negative impact of them can be reduced with good governance, and a well-led board will take conflicts or crises and turn them into opportunities or innovation. If we fear conflicts or crises and want to avoid them, we are more likely to fall into the trap of not talking about them. They then become the elephant in the boardroom, and only ever see the light of day in ‘carpark conversations’ - growing bigger and more feral every day we don’t deal with it.
If we see conflicts and crises as natural and normal, we are more likely to name the issue and talk about them openly in the meeting- and that is halfway to solving most dilemmas. It also helps if we are not obsessed with finding the ‘one right answer’, but can hear what are the different needs and negotiate ‘good enough’ solutions. There are simple tools that can not only help boards manage conflicts and crises, but also help make the organisation even stronger and more relevant in the process.
Myth #6: The best governance training is experts telling us what’s ‘best practice’ for us.
This is a myth largely because of all the other myths. There is no one right way that can be ‘taught’ for all situations, no holy grail of perfect practice that can be memorised. We can benefit from hearing the latest research, by being exposed to some of the variety of different models and methods, but one persons’ idea of ‘best practice’ can be more limiting than enabling. In the complex world of governance, we need a smorgasbord of solutions for the diversity of contexts we might be operating in, and able to be more attuned to cultural nuances. We need fewer heroic exhortations, and more opportunities for hearing multiple perspectives and sharing ideas and experiences. These days no strong and effective leader would dare declare they know it all and have nothing left to learn. But we will learn by being empowered to reflect on our real-world experience, not being told what to think, or by being intimidated by impossible expectations. We need to help give people the confidence to construct their own models. Leadership is about sense-making, trying out ideas, and getting feedback. This cannot be done in a ‘best practice’ bubble.
Thinking about stretching or leaving your bubble?
LEAD partners with capacity building organisations to provide governance seminars and workshops. Check our events page to see if there is a programme in your area. In addition, we provide governance coaching and mentoring for boards who are committed to developing their governance approaches. Contact us on info@lead.org.nz if your board is interested in some coaching or mentoring. Have a specific governance question? Email our Governance Guru and he will answer it on our webpage: garth@lead.org.nz
Finally, for those wanting a deeper dive into these issues we offer a full day Governance Masterclass.
In 2019 these Governance Masterclasses sold out! Find out more and register here today to make sure you secure a place. 50% discount if a second person comes from your organisation.