Consequential Governance BRooklyn And Staten Island Heads October 14, 2010 Cathy A. Trower, Ph.D. Trower & Trower, Inc. [email protected] 1.

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Consequential Governance

BRooklyn And Staten Island Heads

October 14, 2010

Cathy A. Trower, Ph.D.Trower & Trower, [email protected]

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Why do nonprofit boards too often underperform?

Because they can.

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The Central Proposition

“Trustees who understand their

responsibilities are the best hope for the

careful consideration of the long run.”

-- Henry Rosovsky

The University: An Owner’s Manual (1990), p.269

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What is great governance?A mission focused, effective and efficient process to

frame issues and develop policies that shape the strategic direction of the organization.

Helps assure that resources (people, time, and money) are assembled and deployed for the successful implementation of the organization’s plans.

Great governance is not a natural act. Intentionality and spontaneity Diligence and playfulness Comfort with ambiguity Ability to adapt Capital investment in all its forms

Financial, social, political, intellectual

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Core board responsibilities

With management…

1. Determine the future of the School.

2. Ensure the quality of education and student life.

3. Protect the financial health of the School.

4. Ensure effective leadership.

5. Develop, evaluate, improve, and perpetuate an effective governance function.

6. Reflect the community served and strengthen relationships with key stakeholders.

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Most boards are more efficient than effective

They meet periodically, and when they meet may not be in sync with critical events at the School.

They are comprised of very busy volunteers, who represent a variety of backgrounds with different motivations, propensities, and patience for service on nonprofit boards.

When it comes to the School, they are part-time amateurs overseeing the work of full-time professionals; governance is not their “day job.”

They have limited information and time available (during meetings and between meetings) to think about and work on the complex issues the School faces.

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“Good is the enemy of great” --Jim Collins

Many boards are mediocre. Some are pretty good. Few are great.

Board self-assessments tend to overrate governance.

There is less tolerance:for thought than for actionfor ambiguity than for clarityfor sense-making than for decision-making

Routines fully embedded and, therefore, difficult to change.

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Governance as Leadership

Adapted, with permission, from the book of the same name by: Chait, R., Ryan, W. and Taylor, B. (2005). BoardSource and John Wiley, Inc.

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Modes of governance What?

▫ Fiduciary: Stewardship of tangible assets. Oversee operations; deploy resources wisely; ensure legal and financial integrity; monitor results. ROLE: STEWARD - RESPONSIBILITY: OVERSIGHT

How? ▫ Strategic: Partner with senior staff to think strategically; scan

internal and external environments; design, reflect on, and adapt strategic plans; strengthen competitive advantage. ROLE: STRATEGIST - RESPONSIBILITY: FORESIGHT

Why? ▫ Generative: Source of leadership to discern, frame, and

confront challenges rooted in values, traditions, and beliefs; engage in sense-making, meaning-making, and problem framing. ROLE: SENSE-MAKER - RESPONSIBILITY: INSIGHT

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The 3D Organization

Governance asLeadership

Type 1 Fiduciary – Productive

Goals: • Protect assets. • Ensure resources used efficiently & effectively in pursuit of mission.

Type 2 Strategic -- Logical

Goal: • Guide organization from present to preferred future.

Type 3 Generative -- ExpressiveGoals:

• Shape the thinking in the other two modes. • Define the future. • Frame the questions. • Look for cues and clues.

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Gen

era

tive

Stra

teg

ic

Fid

ucia

ryOpportunity

for Generative

Work

Time

Modes on the Generative Curve

Thinking

Planning

Execution

Sense Direction

Framing

Inquiry Oversight

Value-added fiduciary workOversight Inquiry

• Due diligence?• Scandal free?• In compliance?• Can we afford it?• Clean audit?• Budget balanced?• Do we manage risk?• New program meets

market?• Is it legal?• Can we get the gifts?• Is staff turnover

manageable?

• Hold what in trust for whom?• Safeguards in place?• Voluntary measures to earn

trust?• What the opportunity cost?• Insights from audit?• Budget matches priorities?• Do we take sensible risks?• New program serves mission?• Is it ethical?• Do donors expect too much

control?• Are staff treated fairly?

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Value-added strategic workPlanning Thinking

• Money, space, personnel?• Compensation plan?• Build on strengths?• Size of market?• What is? [extrapolation]• Valid assumptions?• Can we see the future?• Traditional competitors?• Internal preferences?• Management must do

what?

• Business model viable?• Great place to work?• Victim of our virtues?• New markets?• What could be? [invention]• Make new rules?• Do we understand the

past?• Nontraditional

competitors?• Customer value

propositions?• Board must do what?

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Opportunity to influence generative work declines as issues are framed and converted into strategies, plans, and tactics.

Opportunity to influence generative work declines as issues are framed and converted into strategies, plans, and tactics.

Opportunity for Generative Work

Plans, Tactics, Execution

Strategies, Policies

THE GENERATIVE CURVE

Sense-making Problem-framing

Time

How do we reduce teacher turnover?

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Gen

era

tive

Fid

ucia

ry

Stra

teg

ic

Align rewards with priorities

Create great place to work

Modify pay plan & hours

Opportunity for Generative Work

Time

Should we build a new fitness center?

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Gen

era

tive

Fid

ucia

ry

Stra

teg

ic

Strengthen market position

Build new fitness center

Opportunity for Generative Work

Time

Make sense of amenities arms raceDiscuss health/fitness in context of the “whole” child

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Fiduciary Questions

What are the fiduciary, but non-financial, roles of our boards and committees?

What safeguards do we have in place to avoid fiduciary failures?

If we held an annual stakeholders meeting, what would we say about the fiduciary performance and the board’s effectiveness as a steward? What would they say?

What are our major financial vulnerabilities? What are we doing as an organization and a board to address them?

Even though we are not bound by Sarbanes-Oxley, are there some provisions we should adopt?

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Strategic QuestionsIs our business model of viable over the next 10-15 years?

If not, what has to change?

How fast should we adopt new techniques to enhance our quality, versus invest in process improvements and optimizing use of our current technologies?

How can we assure we don’t just satisfy, but actually delight, our students, teachers, parents, donors, employees, and community?

What external factors will most affect the School in the next 24 months?

What should be atop the board’s agenda for next year?

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Generative Questions

What will be most strikingly different about this School in five years?

What do you hope will be most strikingly different about this School in five years?

What do you hope will never change about this School?

On what list, which you can create, would you like this School to rank at the top?

Five years from today, what will this School’s key constituencies consider the most important legacy of the current board?

What headline would we most like to see about this School?

What is the biggest gap between what the School claims it is and what it actually is?

What is the most valuable action we could take to be a better board?

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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

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CEO Safety Zone

CEO Safety Zone

CEO Danger ZoneCEO Danger Zone • Bounded technical issues

• Relatively low stakes

• Scripted and staged by staff

• Preferred course of action clear

• Board handled, not engaged

• What could go wrong?

• Bounded technical issues

• Relatively low stakes

• Scripted and staged by staff

• Preferred course of action clear

• Board handled, not engaged

• What could go wrong?

Contested Territory: In Theory

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Danger ZoneDanger Zone

• Board engages issue.

• Staff bristle or stiffen.

• Tug-of-war ensues.

• Board demurs or disengages.

• CEO frustrated or undercut.

• Bystanders remote or resentful.

• Time and energy wasted.

• Marginal value added.

• Board engages issue.

• Staff bristle or stiffen.

• Tug-of-war ensues.

• Board demurs or disengages.

• CEO frustrated or undercut.

• Bystanders remote or resentful.

• Time and energy wasted.

• Marginal value added.

Contested Territory: In Reality

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Safety ZoneSafety Zone

• Look upstream.

• Substitute substance for minutiae.

• Board more engrossed, less intrusive.

• Senior staff open-minded.

• Values, culture drive deliberations.

• Engage collective mind.

• Mitigate personal agendas.

• Look upstream.

• Substitute substance for minutiae.

• Board more engrossed, less intrusive.

• Senior staff open-minded.

• Values, culture drive deliberations.

• Engage collective mind.

• Mitigate personal agendas.

Common Ground: Hidden in Plain View

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Underpinnings for success

• Thoughtfulness:▫ Metacognition and “self-overhearing”

(Philip Tetlock)

▫ Getting on the balcony (Ron Heifetz)

• Caution:▫ “If you boarded the wrong train, it’s no use

running along the corridor in the opposite direction.” (Dietrich Bonhoeffer)

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Part IIGetting Traction

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Imp

ed

imen

ts to

critic

al th

inkin

g

Click icon to add picture

At board meetings

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“Thinking is the hardest work there is, which is probably the

reason why so few engage in it.”

-- Henry Ford

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The most effective boards Are a strategic asset and provide a comparative advantage.

o Contribute in distinct ways to advance the mission.

Add value and derive value from meaningful participation in consequential discussions that yield important results.o Enrich purpose to improve performance.

Are self-reflective and more self-critical than self-congratulatory.o Understand their role vis-à-vis management.

Think independently and govern collectively.o Model behaviors trustees want the organization to exhibit.o Balance short and long-term perspectives.

Learn and perpetuate a culture of learning and inquiry.o Avoid diagnosis momentum.o Practice dialogue and dissent.

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At a typical board meeting…• What percentage of intellectual capital is untapped?• What percentage of time is put to good use?

• How often are ideas put into play v. explanations and reports?• What are you optimizing? (quicker OR better decisions)

• What are the goals of board meetings?▫ If we wanted better thinking, what would we do differently?

• In addition to periodically asking, “How are we doing?” boards should stop and ask, “What are we doing?”

• Practice arrests thinking; becomes routine/habitual▫ What about board meetings stifles thinking? ▫ What might we do differently to enhance thinking?

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Steps to Better Governance• Find. Frame. Focus.

▫ Figure out what matters most, how to frame it, and how to add value.

• Structure for strategic intent.▫ Strategy should drive structure, not simply mirror the organizational

chart.

• Build a boardroom culture of inquiry, learning, and high team performance.▫ Ensure dialogue and debate on critical issues.▫ Fit format to content and purpose.▫ Have goals and outcomes.▫ Summarize implications, expectations, next steps.

• Engender accountability.▫ Evaluate the board’s performance, individual’s performance, and board

meetings.▫ Make decisions as if you had to explain them to stakeholders.

Find. Frame. Focus.

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• Describe reality, highlight critical clues and signals.

• Avoid deep dives into shallow pools.

• With management, decide what to decide.▫ What are most important questions to address in next year?▫ How might we frame the issues?▫ Establish decision agenda.▫ Wear “tri-focals” to examine “triple helix” issues – fiduciary,

strategic, and generative (mission, values) perspectives.

• Co-determine annual work plan, timing, and agendas.

• Schedule KHAAN dialogues. (Keeps Head Awake At Night)

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Structure for strategic intent

• Strategy should drive structure, not simply mirror the organizational chart.

• Ensure that the board drives committees, not vice versa.▫ Develop derivative agendas for committees.▫ Encourage board to assess, merge, differentiate, eliminate

committees.▫ Streamline structure to increase impact, broaden participation.

• Propose and empower strategy-driven, outcomes-oriented task forces.

• Coordinate and integrate committee work.

• Wean staff from tightly coupled committees.

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Build a culture of inquiry.Fit format to content and purpose; emphasize themes.At the outset: State meeting goals outcomes and how the board can add value.Furnish less data with more meaning (e.g., dashboard).Maximize discussion; minimize presentation by creating efficiencies.

Broaden participation.

Ensure robust discourse, dialogue, and debate on critical issues. Tap trustees’ intellectual capital. Develop and disseminate advance discussion questions. Insist on confidentiality. Encourage collegiality, elicit dissent. Pose catalytic questions. Entertain various “what if” scenarios.

At the end: Summarize implications, expectations, next steps.• Be clear about what we did and will do.

Advance surveys Advocacy panels Silent starts

Anonymous input Role plays Breakout sessions

Consent agendas On-line work Flash reports

Pre-clarification protocol and responsive reports

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Build the board team.• Teamwork

Have clear, compelling, consequential, challenging goals Avoid group think through appropriate deliberation Maintain an appropriate sense of urgency Articulate team goals; do not allow individual goals to take precedence

over team goals Get to know each other personally/attend to social capital/build trust

• Courtship before marriage Personal style as well as technical expertise Be mindful of group dynamics, culture, values

• New trustee orientation To the organization and board norms/culture Provide mentors, glossaries, directories, connections, frequently asked

questions• Succession planning

Enforce term limits, not just terms Attend to succession for trustees, chairs, board officers Be transparent

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Engender accountability.▫Position board as a model of performance

accountability.▫Disperse responsibility for the quality of governance.▫Make decisions as if you had to explain them to

stakeholders. ▫Enforce group norms; do not tolerate violators.▫Evaluate the board, individual trustees, committees,

meetings and demonstrably respond to results.▫Hold executive sessions for reflective practice.▫Convey examples of board’s pivotal contributions

and shortfalls.

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Executive ChoicesHandle the Board Engage the Board

Bring mid-curve proposals to approve

Bring top of curve challenges to frame

Emphasize decision making Emphasize sense & meaning making

Downplay tough questions/surprises

Highlight tough questions/surprises

Engage allies bi-laterally Engage board collectively

Work outside the boardroom Work inside the boardroom

Get buy-in Decide what to buy

Persuade and prevail Discuss and deliberate