Something Bigger Than You: Board Governance

BoardSource is a leader in assisting nonprofit organizations fulfill their missions via smart, effective governance.  In this episode we will be speaking with Jenifer Holland, associate vice president of BoardSource.  She guides us through the fundamentals of board member selection, initiation, and duties. From these sound fundamentals any organization will be able to meet its mission and thrive.  Join Mike Sacopulos to hear a practical episode on skills every physician leader needs.

This transcript has been edited for clarity and length.

Mike Sacopulos: I would like to welcome Jenifer Holland to SoundPractice podcast. Jenifer is the vice president of consulting and learning practice with BoardSource, based out of our nation's capital. Prior to being with BoardSource, Jenifer created Alliance Work Community Enhancement, a youth mentoring organization in New York Jenifer, why don't you tell us a little bit about BoardSource? What do you all do?

Jenifer Holland: We care very deeply about excellence in governance and, more specifically, our vision is a world where every social sector organization has the leadership it needs to fulfill its mission and advance the public good. And, for us, that really means investing in the knowledge and the practices of both board and staff leadership. We know that it's important that boards of directors work effectively with CEOs or executive directors, whatever term our different nonprofit organizations may use. And we exist in that educational and equipping space to help leaders do that.

Sacopulos: Excellent. So clearly everyone at BoardSource has a front row seat to observe the actions of many boards of directors. And if I was more polite, Jenifer, I would probably ask the question “what do you see that organizations are doing well through the boards of directors?” But that's not what I'm interested in. I'm interested in common mistakes that boards of directors make. Do any come to mind?

Holland: Certainly. I think it's fair to take our cautionary tales and move forward with them. And I think what I would do for the benefit of our discussion today is just confine myself to two that I see quite frequently and that play out in a number of different ways no matter what kind of organization, large, small, established or startup you might be a part of.

The first would be the mistake of relegating strategic thinking to one time per year or to your annual retreat or to one-, three- or five-year strategic planning processes only. And the reason I say that, Mike, is because we know that organizations and organizational leaders, board members specifically, report that they feel the most connected to the mission of the organization and the most activated and engaged as board members when they are thinking strategically.

And if that kind of activity is happening only once every three years or so, what we can fall at risk of is a series of board meetings that become backward-looking report-outs of things that have happened as opposed to a mix of some of those oversight pieces, which certainly are important, but also engaging in ongoing environmental scanning, knowing that our world is moving at a rapid clip these days and that the pace of information has sped up over time. And so why not engage board members in really vibrant thinking about mission purposes and strategy on a regular basis?

I can give one example that was just highlighted by a local law firm here, our local Whitman-Walker Healthcare Clinic just recently did a huge organizational restructure to think very differently about parent subsidiary relationships so that it was arranged in the proper way to serve its constituents and its customers. And that's the kind of thing that can only happen if board members are heavily engaged and thinking about the way that the world is changing together with staff leaders. So that would be the first one.

Another one I might lay out is keeping recruitment on the back burner. It can sometimes be an activity that gets relegated to recruitment committees or an ad hoc task force to find new board members and then the full board sometimes might act in a posture of, "The committee has got this." And the truth is the dynamics in the boardroom really are driven by the people in the boardroom. And oftentimes we think about what kinds of time, talent and treasure we want to recruit to our boards of directors. What I've observed, Mike, honestly, is a bit of an emphasis on treasure sometimes to the detriment or the exclusion of time and talent.

We just name things as we've experienced them, but it really can have some unintended consequences when we get someone to say yes to serve on our boards who has well regard in the community and certainly a great career, but if they're serving on six other boards, that's going to come out in the mix at some point. So, thinking about that time commitment.

Two, thinking about talent. Oftentimes we think about what has historically been known as those hard skills folks that have accounting or legal or other kinds of expertise to bring to boards. And at BoardSource we really believe that because governance has been really entrusted with the full board, we wouldn't care about things like quorum if we didn't, that it really matters what kinds of individual orientations come into the boardroom. And so not only thinking about, if you will, hard talents or skills that folks might have built up over their careers, how do they show up in the boardroom in terms of their orientation to thinking through governance, thinking through leadership, thinking through big questions?

And one of my favorite topic papers of ours is called personalities that build a culture of inquiry, an environment of respect and candor on the board. And if there aren't folks on the board that play that observer role or that coach role or that facilitator role, we find that those things can be missed. And so, it really requires a proactive approach to recruitment to build the kind of dynamic that we want in the boardroom.

Sacopulos: Excellent. Now, you've got us into the topic of recruitment and maybe we can talk about the best policies or practices when it comes to identifying candidates, and I think you were headed down that path. And then once they've been identified, some help on how to recruit the candidates to the board?

Holland: I would share with listeners to the podcast that the good news is that recruitment is something that can be broken down into a series of achievable steps, and when it's thought about as a year-round activity can really benefit from investments. And so a lot of times what we find our clients get benefit from is starting with, but not ending with, it's very important for me to say that, a board matrix, which is a way of taking stock of what skills and talents and abilities you already have serving in board member capacities and board officer capacities, but also dreaming big and thinking about, not only for this organization where we're at today, but five, 10 years down in the future, what kinds of leadership skills and aptitudes will we need then knowing that many board terms are three year terms?

And so, by getting a sense of where there may be some gaps, the board may not have representation in a certain geographical area, for example, or they may not have that coach or that facilitator orientation on the board, there can be a really thoughtful approach to “who are we looking for?” And avoiding the warm bodies approach, which accomplishes two things: One, it creates a much more genuine invitation environment for that nominating committee to put out a request or an ask to a board candidate because folks are able to say, "We're not only interested in you because of your career accomplishments, your reputation, time, talent and treasure, we're interested in you because here's where our organization is headed over the next several years. Here's the identified skills that we are looking for. Here's where we believe you have those skills based on some of the ways we've seen you show up in the community," which is a much different conversation and, to my way of thinking, a much more exciting conversation between board recruitment leaders and candidates.

Thinking through where we're headed and what we need would be one step I would most certainly start with, and with that as the foundation that really allows board leaders to also get thoughtful about finding. You mentioned, Mike, identifying candidates. And while it's quite common and one of many effective strategies to go through our personal networks, I would encourage folks to really push beyond the “who do we know” question. There are all kinds of professional associations, which I also know is part of your listening body, that can really be helpful in thinking through how can we find a candidate who is perhaps a CPA with a certain level of experience? Perhaps we're looking to increase the diversity of skillsets and backgrounds and demographic characteristics of those who serve on our board.

The Association of Black Accountants might be a place where someone might look. Thinking through those professional societies. LinkedIn actually has a way to search for board members and volunteer talent, which operates on a similar algorithm. Not my area of expertise, so I won't explain it in depth, but really to get through those first and second tier circles of connection to those third and fourth tier circles of connection so that we can really compose boards that have both diverse thinking and skillsets and don't leave us looking to the usual suspects who, in some cases, may be over tapped in smaller communities.

Sacopulos: Very nice. So, it seems that we naturally flow into a question that I'm asked a lot, Jenifer, and that is something so simple as what's the proper number of people on a board? Do you get asked this question too? Is it just me? Do you have any advice?

Holland: I'm laughing because with familiarity we certainly regularly get asked, "What's the right size board? What's the perfect size board?" And while I wish I could offer a neatly packaged answer, the truth is there isn't one. What I can share with your listeners is that we've been tracking these kinds of numbers over time. There's a report that we put out every two to three years called Leading with Intent where we ask folks a number of questions, both about the characteristics of their boards but also the performance of their boards.

And in that case we've found that the current average, and I do stress average, board size is about 15 individual board members. That's been dropping since we've done this study starting back in 1994 when it was 19. So we're seeing a slight constriction in the overall size of boards, but we also know that there is a bit of a sweet spot set of questions that individual organizations can ask themselves. If the board is finding it difficult to get anything done that it feels unwieldy, it might be too large of a board. Or if a board feels like there's not enough capacity or peoplepower, if you will, to get anything done, it might be too small.

We do find that if there are too many board members to meaningfully engage in full board conversation or if real deliberation isn't taking place or if board members seem to be disconnected from that governing role and are beginning to verge towards an honorary way of showing up in the boardroom, those might be clues that the board is somewhat too large.

Sacopulos: In 2008, the IRS started requiring nonprofit boards to have a conflict-of-interest policy. Do you believe that most nonprofit boards really have that policy? And I'm not talking about people that work with BoardSource. Just out of your general experience, do most of them have those policies and do you think that they help reduce conflicts of interest?

Holland: Well, it's an excellent question and it's one that I think has always held a lot of importance for nonprofit organizations, not the least of which for the reason of maintaining nonprofit credibility, reputation, and brand status in a community. It is something we certainly get asked about a lot by independent journalists across the country.

I will share from our Leading with Intent data and the folks that we have surveyed over time, the most recent statistics that we have show that 94% of our respondents said they did, in fact, have a conflict-of-interest policy. I would share a couple of caveats to that 94% number because, one, having a written conflict-of-interest policy truly is, I would say, metaphorically speaking, the floor, not the ceiling. So having a written conflict-of-interest policy in place is the first step towards being able to create the leadership environment in which conflict-of-interest policy is actually followed.

The other thing I would say is the IRS does ask individual nonprofits as part of their information returns, do they have a conflict-of-interest policy? They're not required to have one, but they did add the question. So, there's some variation across states. New York, for example, when they passed their law in 2013, does, in fact, require nonprofits to have a written conflict-of-interest policy.

But to the second part of your question, which I think is fascinating, do these policies help reduce conflict of interest? I would say flatly, no. A policy is necessary but not sufficient to help reduce conflicts of interest. So, might there be some indication that folks are paying attention, are aware, understand that conflict of interest is an important issue for them by fact of virtue that they have a conflict-of-interest policy that's written down? Certainly. But what really, really matters is that it's being followed and we've seen some examples of that in the news not all that long ago. Just right here up the road from Washington DC where BoardSource is headquartered, Baltimore's Mayor, Catherine Pugh, resigned following a scandal that revealed she'd profited in the hundreds of thousands of dollars from selling her self-published children's book to the University of Maryland Medical System where she served as a board member. That organization had a written conflict of interest policy and yet these revelations still came to light.

So, I would encourage folks to spend time thinking about their policy. That is a good activity to engage in, but I would encourage folks not to stop there.

Sacopulos: I think that's a great answer to that question. And the example that you just brought up from Baltimore seems to me to be one that most people would fit with when they think of conflict of interest, and that is that it's all about money. But sometimes conflicts of interest involve other areas. Do you agree with that?

Holland: I would say that it can. I think broadening that definition to resources makes a difference. The IRS definition does talk about financial interests. It defines a conflict of interest as occurring where the individual's obligation to further the organization's charitable purposes is at odds with their own financial interests. But, that said, there can be times when board members are over-committed, serving on multiple boards, as I raised earlier, where they find themselves caught in a bind in terms of their duty of loyalty to one organization or another. For example, in a scenario where the two organizations are both seeking funding from the same source, it can be the case that nonprofit board members find conflicts around their duty of care if they're serving on too many boards and are unable to adequately prepare by reading their board packets and serving and fulfilling their committee commitments to multiple boards.

So, I would say broadening that to thinking about resources inclusive of time is a fair way to think about it.

Sacopulos: Okay. Recently, and this not so much in a nonprofit world, but in the corporate structure we've heard of several boards having to address relationships between a CEO and an employee of the organization. And this, to me, really seems to be at the crossroads of conflict and oversight responsibilities for boards. Does BoardSource encounter these types of issues with relationships between management and employees with some regularity?

Holland: I would say that we've been seeing those kinds of questions surface to us as consultants and resource providers, and also being showcased in the various trade papers and nonprofit news increasingly over the last couple of years. And in two ways, specifically thinking about CEO-employee relationships, one would be thinking about the employment culture in which nonprofit staff operate and conflicts that can come in that space. And also thinking about these issues with respect to sexual misconduct. It's certainly something that we, as an organization and our CEO, Anne Wallestad, has written about because the common parlance is often that the board has only and exactly one employee, the chief executive officer.

And truly it's worth thinking about that in a slightly different angle because in that construction, that sentiment obscures the fact that the board has a real role in giving leadership and oversight to the entire organization, including protecting its people. And so, if you think about the board's role as protecting organizational resources, extending to the employment body, the overall corpuses of human talent that's helping to achieve the mission, there is a role, appropriate role, for the board to play.

Sacopulos: I would agree with that.

Let's shift away from relationships, appropriate, inappropriate, or otherwise, and let's talk about board orientation. Can you give us some of your expert tips on how boards can improve this process of orientation?

Holland: Absolutely. I would say that a really strong board orientation process is lively, is person specific, and is mission specific. What I mean by that is that it is not uncommon for us to work with organizations that have really to be commended to their benefit, created beautiful orientation materials in the form of board orientation handbooks or PowerPoint slides. Sometimes organizations create tours, if you will, of their nonprofit space to help onboard new board members. And those things I would say can work towards an effective orientation process. But, again, I might call in the phrase necessary but not sufficient that what we know when we recruit talent to boards is that we are building individual relationships with individual leaders and especially for those organizations that perhaps only meet two times a year or quarterly, the ultimate goal is to get that board member up to speed, both from an information standpoint and also from a cultural standpoint to be able to contribute from day one.

And we know that sometimes folks show up to a boardroom and are unaware of the written and unwritten norms, or they don't want to come in and be the new board member that steamrollers their opinion or their way or their voice in a given board meeting, and so one of the things that can really help with that is a good board mentorship program. And folks sometimes struggle with this. Folks sometimes feel like matching to a mentor is a risky business or there's some kind of magical recipe that seems quite elusive to get the right two board members together.

And one of the things that we like to lift up is really a very simple and straightforward three by three scenario by which a veteran or an existing board member does three things three times with a new board member. One is they call up that board member when the agenda comes out for the upcoming board meeting, and they walk it through with them and they give them some nuance and some ideas about what they should expect to happen in that given board meeting. Two is they're willing to sit next to that new board member in the board meeting. And three is they show up a little early and they introduce that new board member around.

Three things three times. It does not necessarily have to be a mentorship for life, but can really go a long way towards helping new board members feel like they are really poised to contribute in all aspects of the organization, both informationally, culturally and from their own unique leadership vantage point.

Sacopulos: What a great tip, I like that one very much.

And I was preparing for today's interview, I pulled up BoardSource's website. I got to say, what a tremendous resource, all kinds of great information. I highly recommend it to the listeners of SoundPractice and I will put the link in the show notes to make it easier for folks. But, Jenifer, I learned 10 basic board responsibilities from your website, and number one was to determine mission and purpose. It occurs to me this seems easier said than done. Where would you advise a nonprofit health entity board to start to determine their mission and purpose?

Holland: That's an excellent question, Mike. I would respond to this question in two ways: One is we know that, at the point of incorporation, launching a nonprofit in a healthcare space and as an incorporated charity is a different scenario than shepherding a healthcare entity forward after they have already been incorporated.

I would commend your listeners to a website which is called The Power of Possibility.org, which goes through less than half a dozen key inflection points in a nonprofit's life cycle, including startup that would really give some good advice to any of your listeners who may be considering starting a healthcare entity.

But I'll answer the question from here on out with the presumption that folks are already incorporated and up and moving. In that case, when we say determine mission and purpose in the 10 basics, what we really mean is how authentic, how vibrant and how lived is an organization's mission and purpose? We know that the healthcare entity received a charitable exemption for a reason. We know that documents were in order. We presume so, and take that for granted for the purposes of this conversation, but do board members understand what that mission and purpose means? Are there things that other folks in our field might do that we would not do as a matter of principle or vice versa, as guided by our vision, as guided by our purpose?

So, I would suggest to folks if the last time a group of board leaders looked back at the organizational mission and purpose was at the time of incorporation, it might be time to do a second check. Or even if the last time board members took a look at the mission and core purposes was three or five years ago when we were doing strategic planning, it might be time to take a second check.

And I'd love to offer a few tips and ways to think about this for your listeners. One is some organizations that we know, when they put together their table tents for board members, it has the board member's name on the front and has the organization's mission and vision on the back. So every time you're attending a board meeting live, you're reading and thinking and seeing the vision and the mission of the organization and you can use that. Each individual board member can use that as a prompt and an inspiration and a filter for decision making and for showing up in conversation, in deliberation as a board member on behalf of that organization.

The other thing I would share that's thinking that we have been doing more and more writing about recently is that some strategic planning wisdom that we may have heard over time, the last five years, last couple of decades, would be that it truly is organizational mission that determines the strategic direction of the organization itself. And while that's not necessarily untrue, things are shifting and moving in the nonprofit sector and in the interplay across sectors in society, I would argue, such that organizations are cooperating in long term collaborations more than ever before.

And so, when board members think about their duties of care and loyalty and obedience, I would encourage folks to think about those core purposes first as opposed to organizational boundaries or using property boundaries, so to speak, as the way of thinking about what it is that we're caring for. And when we think about it that way, we have the opportunity to think about activities that we've historically done that maybe no longer need to be done or could be done in partnership with another healthcare entity or nonprofit organization.

Sacopulos: Very interesting. One of the other responsibilities of boards that I picked up in BoardSource website is to enhance the organization's public standing. And it strikes me as both a broad statement and a somewhat non-obvious one. Can you give me some examples of this? Does it cover board members' personal behavior as it may reflect upon the organization that they're serving on the board of?

Holland: Absolutely. I love this question, Mike, because I think it is worth digging down into what this means at the corporate level for the full board and what this may mean for individual board members. And really what we are signaling is action at both levels. So, broadly speaking, the full board has a role to play on behalf of the healthcare entity's mission and vision and public standing in the public sphere as it relates to advocacy, as it relates to communicating with the public and as it relates to communicating with the media.

I'll take the media example first, which is we know that for organizations or we've experienced over time in our work with nonprofits, that sometimes if there is not a carefully thought through or recently updated media communications policy that the board has adopted and negotiated together with the CEO, that if something happens where public commentary is needed, the public can get mixed messages or messages that need to be edited or curated over time. And so it really is the board's responsibility to speak with one voice in times of opportunity and in times of crisis. So that is one example I would give of a corporate responsibility to enhance the organization's public standing. We've got a lot of resources on the board's role in advocacy at another one of our resources called Stand for Your Mission.org. It's one of our campaigns. And all of those tools are completely free to anyone that may want to download a topic paper or apply for our every so often Stand for Your Mission awards.

But to your point about board members' personal behavior, we do know that it's valuable and something we would commend to your listeners to consider creating or revising, reviewing a board member's code of conduct around their personal behavior. And that can play out in a number of organizationally related events. I'll give one example that one of our fundraising speakers gave on a webinar not too long ago, and she talked about a client of hers that she had worked with where board members were fulfilling their fundraising duties by reaching out to their networks and selling tables at the annual gala and getting folks in the door and purchasing tickets on behalf of the organization. But that once that organization was hosting the actual event, board members clustered together and didn't necessarily mix and mingle and share the mission and the vision of the organization with those folks that attended and, in fact, over-imbibed.

So if we don't give ourselves some clearer rules of the road in terms of how we want to show up as ambassadors for the organization, some unintended consequences can play out.

Sacopulos: I have to say that sounds like a much more entertaining fundraiser than the ones that I, typically, attend, Jenifer, but God bless them.

I'm going to drill down into a little bit more specificity here with this next question. And we were thinking about healthcare organization boards of directors. In healthcare there's some requirements for some independent auditing. Do you recommend or does BoardSource recommend that the auditor be retained by staff, the CEO, CFO or directly via a board committee?

Holland: It's a great question. I'll answer it broadly and stressing my practitioner and non-legal hat to say that we do share with all of our constituents and members that selecting and hiring the independent audit firm is a board responsibility. That said, that can be delegated at the committee level to doing some of the vetting and review of appropriate auditors and making a recommendation back to the full board.

Sacopulos: Excellent. We're just about out of time, but I'm curious what the future holds for BoardSource? What initiatives and events does BoardSource have planned, and tell people how they can interact with your organization?

Holland: We'd love to interact with your listeners in any way that may serve their own leadership and mission and visions of their healthcare entities and their organizations. Also, I would say more, at your fingertips as you mentioned, thank you, Mike, our website is really chock full of short topic papers, infographics, the kinds of things that if you are looking for an input that might be just at your fingertips for board members to digest before your next board meeting, look us up. Go to the topics button on our webpage and there are hundreds of free downloadable templates and tools that you can go ahead and use for your own board development goals, and we'd love to serve you.

Sacopulos: It is truly a treasure trove. And, again, I'll have the link on the show notes.

Jenifer Holland, of BoardSource, thank you so much for joining us on SoundPractice. It's been a real pleasure. Thank you.

Jenifer Holland, Jenifer.Holland@BoardSource.orghttps://boardsource.org

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