Introduction
Lately, I have been following conversations about boards being run as businesses. Therefore, I thought I would write my thoughts on this topic. There are pros and cons to this approach. However, I believe there is a happy medium. This article addresses that balance.
Pros of Governing Non-Profit, Charitable, Public-Sector, and Association Boards As Businesses
The benefits of approaching board governance in non-profit, charitable, public-sector, and association boards as businesses are as follows:
- It requires the board to question whether programs and services have stated outcomes and whether these outcomes are being achieved.
- Assessing risks is part of every decision-making process.
- Measureable and implementable policies are essential.
- The board views its strategic plan as measurable, doable, and realistic.
- The CEO is required, at regular intervals, to report on areas of major risks to the board.
- The programs and services are based on the needs of clients/members.
- The board ensure decisions are timely and based on solid evidence.
- The CEO provides all options to the board and outlines all pros and cons associated with each option.
- The board is focused on the future and rather than the past.
- The board questions the value added prior to approving new initiatives.
- A cost-benefit analysis is seen as essential prior to making decisions.
- The board questions the value it brings to the organization.
- Board members are selected for the skills they can bring to the governance table.
- The board is willing to hold the CEO accountable for his decisions.
- Internal auditing is considered essential.
- The board recognizes that it must pay salaries which compete with other sectors, if it wishes to recruit and retain the best personnel.
- The board invests in governance training.
While this list is not exhaustive, it is clear that it is possible to use business principles in non-profit, charitable, public-sector, and association boards governance practices. Now it is essential to look at the cons associated with these practices.
Cons of Governing Non-Profit, Charitable, Public-Sector, and Association Boards As Businesses
There are always benefits and drawbacks to any approach. Therefore, it is vital to look at the other side of the argument. There are cons associated with using business principles in non-profit, charitable, public-sector, and association boards’ governance practices. Boards which avoid business practices often do so because of one or more of the following reasons.
- Many programs and services do not have nationally well-defined outcomes. Therefore, it is not always possible to quantify outcomes.
- Assessing risks is time consuming and often perceived as not essential for non-profit, charitable, public-sector, and association boards.
- Writing measureable and implementable policies takes time which boards do not have because there are too many critical issues to deal with on a daily basis.
- The board would rather view its plan as what it wishes to accomplish even though what it desires is dependent on other parties or funds the board does not have at its disposal.
- It is considered too much work to require the CEO to report on areas of major risks; the board will ask for information as it is required.
- The programs and services are best when they are based on the wants of the clients/members.
- The board ensures it considers all of the emotional arguments prior to making decisions and at times will put the evidence to one side in favour of what others actually want.
- It is faster if the CEO studies an issue and provides the board with a recommendation for consideration.
- The board is focused on the current issues.
- The board determines the value added associated with programs or services based on the feedback of users.
- A cost-benefit analysis is not seen as essential because many of the benefits cannot be measured.
- The board is not expected to question the value it brings to the organization because it is a mute question.
- Board members are selected based on criteria which may have nothing to do with skills or abilities.
- The board sees the CEO as an equal partner and shares accountability for decisions or issues within the organization.
- Internal auditing is not part of the organizational processes.
- The board believes salaries are expected to be lower than in the business sector and this is wise if it is seeking funds to run the operations.
- The board sees governance training as an unnecessary expense and their money should be used to benefit its members/users/clients.
Final Comment
Different boards are at different stages of growth. Therefore, each board’s approach to governance will be dependent on the board members, their philosophies, the amount of board governance training provided, the believes and influence of the CEO, and the external political influence impinging on the board.