Board and CEO Roles and Responsibilities.2014 - cffk.org Mason, APR, Strategists, Inc. 2014 Board and CEO Roles Building High Performance Organizations March 6, 2014

Debbie Mason, APR, Strategists, Inc. 2014

Board and CEO Roles

Building High Performance Organizations

March 6, 2014

Center for NonProfit Excellence Leadership Success Academy

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Today’s Topics

p Maturation cycle of boards p  Types of Boards p Roles/Responsibilities p  Trends p Best Practices p  Exercises


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Rationale Why have a board?

n Required by law n Oversight n  Input n Outreach n Support


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Types of Boards p Advisory/Honorary p Community/Coalition/Ad Hoc p Governing p Institutional


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Advisory/Honorary Boards p  Members chosen for who they are

n  Subject matter experts n  Significant supporters n  Prominent community leaders

p  No governance power (or interest) p  Provide influence and affluence ($$) p  Not legally bound like governing boards p  Limited legal liability


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Advisory/Honorary Boards Advisory/Honorary p  Create linkages p  Provide input p  Seek visibility for organization p  Sometimes are larger donors p  Raise money p  Provide access to donors, elected officials, etc. p  Expert “sounding group” for ideas


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Community/Coalition Community/Coalition/Ad Hoc p  Representatives of governing boards or interests

groups that are not formally organized p  Provide input and discussion platforms p  Create multi-platform, shared responsibility of

issues management in their highest form p  May or may not collect dues or sponsorships, do

programs or activities (through fiscal agent) Example: City or County Advisory Groups,

American Cancer, etc.


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Governing Boards p  The legally required entity of all organizations,

both corporate and nonprofit p  Full performance expectations are outlined in

bylaws p  Actions are legally binding to organization and

individuals p  Strategic p  Generative p  Responsible for vision, governance, advocacy


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Institutional Boards p Universities, large cultural organizations,

older, etc. very established groups p Very prestigious to be selected p Usually quite large 50 plus members p Stratified responsibilities

n  Executive committee governs n  Board fundraises, provides input and outreach

to community


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Maturation Cycle of Boards Where is your organization? p Founding boards p Early governing boards p Hybrid boards p Mature governing boards


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Founding Boards Issue and personality drive

n  Strong leader(s) p Identify community need p Galvanize support from others p Research the issue p Create response and gain support p Incorporate as an organization p Begin services


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Founding Boards Loose governance style

n  Group is largely friends, lacks diversity n  Informal, meetings n  Few committees n  Few policies and procedures n  Lacking structure for board selection, term

limits, etc. n  CEO is usually board chair, or defacto chair n  CEO’s vision is group’s vision


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Founding Boards

Founder as CEO n CEO’s vision is board’s vision n Autocratic management style n  Informal n  Few policies and procedures n  Few systems n  CEO holds all control—board has little


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Early Governing Boards Founder chooses between CEO and Board Chair role

p  Moves from CEO’s vision to group’s vision p  Begin to have structure to board and organization p  Begin to have accountability to board p  Founder still heavily involved, often even

controlling the board p  Board still somewhat loosely selected


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Early Governing Boards p  New board members are added p  More businesslike p  Still rapid with decision making p  Better role clarification for board p  Begin standing committees p  Begin more structure

n  Board orientation n  Term limits n  Policies

Hybrid Boards Hybrid Board – Governance and WORK p Board members acting as CEO p Board members providing pro-bono staff

roles for CFO, CMO, CDO, other p Board members doing work hand in hand

with staff as other staff would do or p No staff at all – board does it all! Mix of governance and management


16 Debbie Mason, APR, Debbie Mason, APR, Strategists, Inc. 2014

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Hybrid Boards Hybrid Board – Governance and WORK p  Important things to make this work:

n  Legal responsibilities are still in force! Must also govern!!!

n  Separate working time and governing time p  Different meetings if possible p  Separate sections on agendas

n  Change roles when communicating with CEO and peers

p  Taking direction from CEO if working sleeve to sleeve p  Guidance when in governing role



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Hybrid Boards Hybrid Board – Governance and WORK p Create real boundaries

n  Different meetings and agendas n  Different chairs and volunteers

p Create artificial coaching n  Make it “ok” to say “change your hats now” or “clear your frames”

p Culture of accountability to deliver – working boards must deliver tactically – governing boards deliver strategically



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Mature Governing Boards Structured

n  Well defined policies, procedures, articles of incorporation, term limits, etc.

n  Better diversified n  Well organized, more efficient meetings n  Efficient committee structure that does the

work of board n  Cleaner role definition

p CEO manages organization p board chair manages board and has

oversight of CEO


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Mature Governing Boards p  Begins to develop greater external focus and

outreach p  Group begins to create vision and plans together

in formal process p  Flexible

n  Addresses issues with rational, businesslike approach in appropriate time with opportunity for input

p  Often outgrows Founding CEO and hires “seasoned, industry” CEO


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Institutional Boards p  Very businesslike in meetings p  Board and staff create vision and plans

together---more staff driven in implementation p  CEO usually high profile, very seasoned p  Standing committees provide input to staff driven

organization p  Many more constituent audiences to consider p  Change is often much slower

Debbie Mason, APR, Strategists, Inc. 2012 Debbie Mason, APR,

Strategists, Inc. 2012 22

Application

Exercise our learning!


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Application 1

With your group answer the following: p  What type of board are we? p  Where are we in the maturity cycle? p  How effective are we? (scale of 1 to 5

with 5 being excellent and 1 being very poor).


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Governing Board Roles Three primary roles

n Vision p  Mission, vision, direction

n Governance p  Planning p  Oversight p  Fundraising

n Advocacy p  Policy p  Raving fans



Responsibilities—Board Vision

n Articulate the vision n Articulate the mission n Ensure the future of organization

p Continue operations p Cease operations



Responsibilities—Board Governance

n  Select ED/CEO, support and assess performance

n  Set and approve CEO compensation annually n  Legal and ethical responsibilities n  Ensure organization planning n  Ensure and protect resources n  Policy making—policies and objectives n  Board development



Responsibilities—Board Governance p Select ED/CEO

p  Develop job description p  Recruit, interview, select

n  Support performance p  Periodic input and feedback sessions

n  Assess performance p  If new, at 3 and 6 month p  Annually at least in writing



Responsibilities—Board Governance p  Legal and Ethical

p Duty of obedience §  Ensure organization remains focused on central

purposes

p Duty of care §  Same care that ordinarily prudent person would

exercise in a like position and under similar circumstances

p Duty of loyalty §  Undivided allegiance to the organization—

organization’s interests must come before any personal gain



Responsibilities—Board Governance Legal and Ethical

p Avoid conflict of interest or even the appearance of conflict of interest §  Established and promoted policies §  Open process for discussions §  Professional procedures for bidding §  Ensure pricing is fair and reasonable §  Never accept gifts or favors from vendors of

organization

§  Established and promoted policies

§  Open process for discussions

§  Professional procedures for bidding

§  Ensure pricing is fair and reasonable

§  Never accept gifts or favors from vendors of organization



Laws Affecting Boards Legal and Ethical

n  Concept of “inurement” p  Organization’s resources transferred without

regard to the tax exempt purpose—includes engaging in unreasonable business practices such as rent, loans, allowances, etc. to board, staff, officers, etc.

p  Disclosure is the key to avoiding problems



Laws Affecting Boards Legal and Ethical

n  Sanctions include: p Revocation of tax exempt status p 1996 Congressional law allowing for

§ 10% personal tax on CEO or organizational management individuals who approved transaction

§ 25% tax up to 200% tax on “disqualified person(s) if situation is not corrected



Responsibilities—Board Governance Planning p  Ensure organizational planning

n  Review annual operations plan and budget n  Develop strategic plan with CEO

p  Quarterly check ups p  Annual reviews p  Drives committee work

n  Develop long range plan (if necessary)



Responsibilities—Board Governance Fiscal

n  Ensure adequate resources for ongoing operations of enterprise p Friend raise

§  Introduce donors to organization

p Fundraise §  Give personal gift each year §  Get gifts from others each year



Responsibilities--Board Fiscal

n  Oversight of resources p Audit p Investments/Endowment p Budgets and expenditures

§  Operations §  Capital



Responsibilities--Board Policy making (approval & not procedures)

n Operations p Finance p Fundraising p Human Resources p Marketing p Program



Responsibilities--Board p  Board development

n  Assess board gaps n  Cultivate pool of potential board n  Recruit from pool n  Select n  Train n  Support n  Evaluate



Responsibilities--Board p Board development

n  Assess board gaps p  Professional/specialties p  Ethnic p  Geographic p  Income p  Gender p  Religion




n  FIND PEOPLE WITH A PASSION FOR THE MISSION OR A WILLINGNESS TO BECOME ENGAGED




n  Cultivate pool of potential board p  Outsiders as committee members p  Donors

n  Recruit from pool p  Job description p  Application




n  Select n  Initial introduction/overview by nom comm n  Interview with CEO n  Follow-up by nom comm n  Official invitation letter stating terms and job

description



Responsibilities--Board p  Board development

n  Train p  Orientation

§  Vision, mission values §  Programs and services §  Strategic plan §  Policies §  Job description and evaluation

p  Ongoing




n  Support p  Mentors p  Nominating committee check in quarterly

n  Evaluate p  Develop metrics for performance! p  Job description p  Self evaluation p  Nominating committee evaluation



Responsibilities--Board Advocacy

n  Conduit to community—spread the word—and bring back messages to the organization

n  Reputation management n  Issues management n  Environmental assessments




n  Conduit to community p  Input to elected/appointed officials p  Competitive point of difference/elevator speech p  Introduce friends p  Cultivate board and committee p  Seek feedback p  Share information




n  Reputation management p  Listen for potential shifts

n  Issues management p  Watch for potential issues in community and industry

n  Environmental assessments p  Local and industry trends



Effective Board Characteristics p Has clarity about responsibilities and roles p  Focuses on the important issues p Uses board time to get important things

done p Uses evaluation to learn, not criticize p Has confidence to take risks p Has constructive relationship with staff p Works as an effective “corporate” unit



Effective Board Characteristics p  Establishes committee work p Balances short-term need with long-term

perspective p Avoids mission drift p  Is outcome focused p Has a clearly defined job description p Has metrics for group and individual

performance



Effective Board Characteristics p Values team work p  Puts the organization as a priority p Culture of trust p Discussion is good, questions are good p CEO is partner

p WHAT ELSE?

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Application 2



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Application 2

With your group answer the following: Write a job description for the ideal board member for where your organization is NOW and what you need right NOW – next three years. Tie back to our first session on leadership characteristics and this session on responsibilities.


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Responsibilities of CEO Manage n Articulate the board’s vision to staff n Establish and maintain culture n Manage day to day operations n  Integrate the staff, board and

volunteers n Educate the staff n Support the board in its fundraising



Responsibilities of CEO

Lead n Communicate the vision and mission

externally n Active in community n Advisor to the Board

p Educate board/staff on key trends/issues p Support board productivity p Support board fundraising




Administration n Oversight of resources

p Financial, tax, audit, staff, and technological

p Risk and facilities management n Programs, services and needs assessment




p Annual planning p Strategic planning p Communication

n  Internal n  External

p Human Resources n  Hire, evaluate, fire



Roles of CEO p Manager

n  Manage fiscal, human, technology and facility resources

p Motivator n  Create and maintain the team n  Support board fundraising

p Chief communicator n  Frequent, open, honest

p  Planner n  Develop process n  Develop organization’s goals and objectives



Roles of CEO p  Partner/Coach

n  Seek board input on policy n  Share mistakes with board willingly n  Ask advice and learn from board n  Seek outside training n  Ask for an annual review n  Do an annual self-evaluation n  Treat board members fairly n  Find board member strengths

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Volunteer Responsibilities Volunteers

n  Input from community n  Output of messages to community n  Auxiliary workforce n  No conflict of interest n  Confidentiality



Responsibilities-ALL p  Leadership p Advocacy p Confidentiality of clients p Respect for all p  Integration

n  Board n  Staff n  Supporters



Application 3




Application 3

Quiz


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Trends-Engagement n Recognize time limitations n  Quickly bring people into the fold

p Orient § Tours, orientation, discussions

p Inform

§ FAQs, fact sheets, case studies, issue papers

p Ongoing education

§  Issues discussions, speakers, articles



Trends-Efficiency Meeting Management n  Consent agendas n  Written summary reports in advance n  Behavior guidelines n  Goals for each meeting n  Performance metrics and updates n  Follow through and accountability



Trends-Communication p  Email p Conference calls for committees and board p Wiki sites/electronic tools for meeting

management and information sharing



Trends-Team Building The team has to know each other p  Socials p  Group planning

n  Strategic and annual p Define goals and objectives p Define common metrics for performance p Define individual metrics for performance p Define accountability

n  Crisis prevention and response



Trends-Planning Strategic planning is in!

n  Shorter process n  Shorter reports n  More data n  Changes the culture n  Increases efficiency for all n  Quality barometer



Trends-Credibility Increasingly skeptical

n  Harder to break through to new folks n  Tougher to establish bonds n  Expect CEO and Board Chair to lead and to

stand out front n  Want data, not just opinions n  Want to see the proof—outcome driven



Trends-Credibility Credibility

n  Harder to establish p  Clear vision and mission critical

§  Communication of that is equally important p  Reputation driven

§  Prepare to prevent and respond to crisis §  Outcomes imperative §  Once broken, very hard to re-establish §  Gray is not ok, society is very judgmental



Trends-Accountability Board accountability is greater

n  Data based decisions n  Transparency n  Visibility n  Integrity and ethics n  Reporting

p  Sarbanes Oxley 2002 spillover to nonprofit orgs



Trends-Government Oversight Form 990 and 990-PF

n  Required—penalties for non-filing and perjury n  Form revisions coming to distinguish between

overhead for general, fund raising, investments and programmatic

n  Will now have to show you have conflict of interest (with whistleblower policies) and travel reimbursement policies



Trends-Government Oversight Form 990 and 990-PF

n  Penalties for tax preparers n  Penalties for nonprofit organizations—revoking

tax exemption status n  Made easier so small organizations can

complete without outside assistance – less than $50,000 gross receipts – 990 N

n  Gross receipts < $200,000 or assets > $500,000 – 990 EZ or full 990 if preferred

n  Anything above that in gross receipts or assets must file full 990



Trends-Government Oversight Mission changes

n  Continued evaluation of tax exempt status based on form 1023 initially stating purpose and mission of organization

p  Review bylaws, articles of incorporation and governing instruments often



Trends-Government Oversight Audits

n  Board members who are independent n  Financially experienced board members n  Required of organizations with $1 Million or

more in revenue n  Financial statements reviewed by independent

public accountant required for organizations between $250,000 and $1 Million in revenue.



Trends-Government Oversight Board compensation p  Increased penalties for self-dealing by board

members who receive and those who vote to approve!

p  Prohibits loans to board members p  Requires board member addresses on form 990

rather than nonprofit address



Trends-Government Oversight Board composition p  Minimum of three members p  No maximum set p  1/3 must be independent board members (last 12

months not compensated, contracted or had family member employed or contracted with organization)

p  No one on board who is barred from serving on publicly traded organization

p  Full board must approve annually and in advance the compensation of the CEO



Trends-Government Oversight IRS’ growing power p  Increasing staff to scrutinize nonprofit

organizations p  Increasing oversight of nonprofit

organizations p Working with congressional mandate (Sen.

Charles Grassley, Senate Finance Committee and others)



Trends-Government Oversight Changes to come…… p  Improvements to 990 and 990 PF forms p Uniform financial standards p Definition of acceptable administrative

expenses p  Expansion of federal court equity and

standing to sue governing boards of nonprofit organizations



Trends-Government Oversight Changes to come…… p Stronger rules for charities operation or

funded outside U.S. p Uniform, cost-effective methods to

regulate charitable fundraising activities



Application 4




Application 4

Exercise Four – Collective Assessment Handout


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Higher Performance Boards

Different Performance = Different Outcomes of Success!



Higher Performance Boards Richard Chait defines “governance as

leadership” by presenting three types of governance:

p  Fiduciary p Strategic p Generative



Higher Performance Boards Fiduciary p Board is steward of assets p Serves as “sentinel” or watchdog p Select and evaluate CEO p Maintain “oversight” of CEO p Oversee the three duties

n  Legal and ethical, care, loyalty



Higher Performance Boards Strategic p Board has partnership with CEO and

senior management p Serves as “strategist” with internal AND

external focus p  Environmental scanning for issues p With CEO prepare strategic plan p Monitor performance with metrics



Evaluation Process p  Decision making changes

n  Is it in the plan? n  How will it affect the plan n  Team decision making

p  Process at all levels n  Individual departments

p  Topic at every board meeting n  Every board committee goals set by plan n  Quarterly and annual updates



Higher Performance Boards Generative p Board is a think tank or “sense-maker” p  Frames situations p Open to discussion p Considers people’s values and beliefs p  Problem-solves, without blame p Creates new ideas and road map to

implement those



Generative Strategic Fiduciary

Board’s purpose Source of

leadership for organization

Strategic partnership w/ management

Stewardship of tangible assets

Chief role Sense maker Strategist Steward

Core work Find and frame

challenges, reconcile values

and choices

Scan environment,

shape strategy,

create comparative advantage

Set mission, oversee

operations, deploy

resources, ensure

compliance

Conducive process

Inclusive conversations

Task forces, ad hoc work groups

Standing committees

Power base Ideas, insights Technical expertise Legal authority



Higher Performance Boards Board Chair is critical! p Ability to lead meetings

n Keep the focus n Use consent agenda n Plan in advance with CEO n Manages issues n Create culture of accountability and

measurement



Higher Performance Boards Board Chair is critical! p Excellent communications skills

n With ED/CEO n Fellow board and committee members n Donors n Potential donors n  Influence and opinion leaders



Higher Performance Boards Board Chair is critical! p Serve as the role model

n Reframe n Respect all values and types of leaders n Objective n Knowledgeable about organization n Manage and motivate volunteers



Higher Performance Boards Board Meeting is Key p Allocation of time

n Consent agenda n Fiduciary topics n Strategic topics n Generative topics n Accountability and metrics summary



Higher Performance Boards Outcome of generative performance is p Greater board engagement p Higher sense of purpose p Greater board enjoyment p Richer staff/board team p Greater organizational success



Critical Success Factors p Culture that uses all leadership types p Culture that spends time in generative

work p Strategic plan p Crisis/crisis communications plan p Annual operations plans p  Team think approach



Trouble Indicators p  Lack of strategic plan p  Lack of crisis/crisis communications plans p  Lack of annual operations plans p  “Lost plans” p  Lack of clear and known policies p  Constant staff turnover p  Board micromanagement p  Board dysfunctional family dynamics



Trouble Indicators p  Lack of passion p  Lack of commitment to show up and work p  Lack of personal financial contributions p  Mission shifting to chase dollars p  Confusion in market place p  Loss of donors p  Lack or loss of accreditations



Application 5




Application 5

Exercise Five Case Studies


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Group Standards

Creating a standard for Monroe County nonprofit boards

p What would that include as minimum expectations?

p What would recognize as superior?



Resources p  For information on governance and roles of board

and CEO n  CFFK Nonprofit Center for Excellence www.cffk.org

n  Board Source, great resource for materials, handouts, workshops, etc. www.boardsource.org

n  Alliance for Nonprofit Management www.allianceonline.org

n  The Independent Sector www.independentsector.org



Resources Books p  Governance as Leadership by Richard Chait,

William Ryan and Barbara Taylor p  Moving Beyond Founder’s Syndrome to Nonprofit

Success by Thomas McLaughlin and Addie Nelson Backlund

p  Exceptional Board Practices: The Source in Action by BoardSource



Homework

Documents to bring to next session from your primary board:

p 990 p Monthly or Quarterly Financial

Package (Balance sheet, P&L, Budget, Budget to Actual)

p Strategic Plan or Annual Plan p Audit or Compilation



Good luck! For more information contact: Debbie Mason, APR [email protected]

(954) 480-7814 (305) 414-8757