I run into a Dallas client at a networking meeting having worked with his board of directors on implementing Policy Governance. Previously, the board directly ran the entire organization which led to serious problems. There were questions of poorly managed funds, self-dealing, and a lack of accountability. But now, the board focuses on strategic issues and oversight while the executive director runs the organization.
Once we changed the nature of the board, we needed to create the executive director’s management team since previously, board committees ran everything. We established a few volunteer “middle managers,” who answered directly to the executive director.
Sitting at the networking meeting, I ask how the management system is working. He tells me, somewhat apologetically, that he did away with the middle managers. “It just didn’t work in our organization.” I ask if the committees still report to him. “Yes,” he tells me, “this works much better.”

Organizations benefit in several ways by removing the board from managing the organization. The board can focus on strategy; it can hold the executive accountable more easily. But one of the unappreciated benefits is that the organization can change its management structure more quickly.

Imagine that the board had created this management structure. Chances are that this structure would probably be described in the bylaws of the organization which are very difficult to change, or, at the very least, the entire board would need to be convinced that changing the management structure is important. Organizations are often stuck with poor management structures because they are written into governance documents or because board members may not understand the management dynamics. By allowing the executive director to shape, and if need be, reshape the management structure, he is able to experiment and adjust, key principles in continuous improvement.

The the executive director I say, no need to feel sheepish about making changes. You are the executive and you are accountable. If you think it is necessary, go ahead, change.

When boards ask how to evaluate their Executive Director, they forget that it is really they (the Board) who is being evaluated.  Boards have a very specific role: represent the interests of some group, be it citizens, members, or people who care deeply about an issue.  The Board is successful if the organization fulfills its mission in a responsible way.  Let’s unpack this a bit.

The Organization Fulfills Its Mission

Let’s imagine a library – one of the most forward-thinking institutions in America.  The citizens pay for libraries through their taxes in order to provide useful services to the community.  How is the library evaluated?  The Board of the library is successful if it can accurately articulate the needs and desires of the citizens, that is, if the can represent the citizens’ interests.  The Executive Director is successful if the library achieves the mission that the Board has articulated.  If the library provides needed services to the members of the community who require those services, then the Board, the library and the Executive Director are successful.  However, even if the Board misfires and sets ill-conceived mission, the Executive Director can still be successful if they achieve the mission as directed by the Board.

Do Not Invent Criteria

Boards often invent criteria to evaluate the Executive Director.  They may choose criteria such as management skills, visionary leadership, or ability to communicate.  But these skills do not necessarily reflect whether the organization itself is a success.  Back to our library example, we may a wonderful visionary leader, but if the Executive Director’s leadership does not translate to the library positively impacting the community in the way the Board intends, then the Executive Director, and the library, are not successful.

Your Executive Director only succeeds when your organization succeeds.  That is the bottom line.

I was talking with an Executive Director whose is beginning to feel attacked by her board.  A few Board members have heard complaints from a few members and decided to investigate.  They commissioned a survey which demonstrated that eighty percent of the members are “satisfied” or “very satisfied” with the organization.  However, when the survey asked for areas needing improvement, members listed several problems, peeves, and displeasures that could be rectified.  The Board’s top leadership viewed this as an indication of serious discontent and is now setting up membership focus groups to discuss how to solve this boatload of problems.  Should the Executive Director be worried?  You betcha.  Time to dust off the résumé.  Is this a hatchet job by malevolent members of the Board?  It may be, but then again it could be something even more subtle and difficult to deal with.

Witch hunts are not always malevolent

There are always problems in organizations.  A leader might say something impolitic or thoughtless; people may simply disagree about a decision that a leader makes.  That’s just a part of life.  Disgruntled people often try to spread their frustration to others by characterizing the leader in a negative light.  The leader might be described as inept, out of touch, overly zealous, too liberal, too conservative.  The disgruntled person will then share selected stories that demonstrate the negative label for the leader.  Those labels can function like a virus. Once the virus spread and another person accepts the negative label of their leader, the infected person will begin to see the negative behavior that never seemed to bother them before.

People will find what they are looking for

This process of only choosing the examples that support a person’s conclusion is called “confirmation bias” and it is a terrible disservice to the organization.  At their best, board members who fall prey to confirmation bias will make bad decisions based upon a distorted view of reality.  At their worst, boards who do not prevent their own confirmation bias will conduct witch hunts, weaving together threads of picayune complaints into a noose to hang their Executive Director.

Look for confirmation bias and protect your organization

All humans suffer from confirmation bias; it’s a natural brain glitch.  However, we can recognize that it happens and take measures to prevent it.  Here are some board practices that are meant to reduce the likelihood of confirmation bias by creating reasonable, set criteria for judging the Executive Director’s performance.

1. Describe what your Executive Director is supposed to achieve.  Let the Executive Director develop a reasonable metric for measuring the achievement.  If the metric seems reasonable to the Board, use that metric.  For example, if the Board of a YMCA wants the children living near the river to know how to swim, let the Executive Director figure out how to measure the number of children who live near the river and what a reasonable number of those children the YMCA should to teach.

2. Place reasonable limits on your Executive Director.  If the Board is worried about sloppy communications which reflects badly on the organization, it should require that the Executive Director not allow sloppy or confusing printed or online communications.  Again, let the Executive Director develop a reasonable way to measure whether something is sloppy or confusing.  If the Board agrees that it is a reasonable measure, the Board should use that measure.

3. Use the standards listed above as the only criteria by which the Executive Director should be evaluated.  Neither fishing for problems nor ignoring problems should be acceptable.

Confirmation bias leads boards to overemphasize negatives or, conversely, ignore problems that should be addressed.  As the main body that oversees the organization, the Board must have a clear, unbiased understanding of the organization so that it can make decisions that are both fair and wise.

Wise boards should seek the advice of their executive (or any staff members) when making decision. However, boards should also seek their own independent advisers as well. Here’s why (I know this will not make me popular).

The purpose of the board is to serve a group of people. Let’s call them the moral owners of the nonprofit. If a group has members, the members are the moral owners. If a group serves the arts, then the citizens of a particular area or maybe art-lovers may be the moral owners.

The board serves as the fiduciary of the moral owners meaning that the board represents the owners’ interests. The board delegates authority to the executive and directs what the organization should accomplish. It also provides oversight to ensure that the executive (and by extension the staff) is acting in the moral owners’ best interests.

Here is the problem. As executives, we all want to believe that we will work exclusively for the benefit of the organization, that we are forever above reproach. But the truth is, we all have our own interests that may diverge from the moral owners, and boards have no litmus test to separate the sainted executives who only work for the moral owners’ interests, from those of use who are simply human with our own self interest.
If we, as executives, cannot understand our own self-serving nature, we will never understand the purpose of boards.

This is why we want independent boards to watch over the executive. Sure, we are partners, but partners with different roles where the board must provide oversight. Boards that fail to do this are not performing their fiduciary role.

The executive should provide guidance to the board, but if the board knows is job and is competent, the executive should not choose board members because of the potential conflicts of interest.

However, many boards are not competent. In this case the executive should help the board to understand its role and help it to think through the issues for selecting new board members.

(This response is based upon the answer to a question posted on LinkedIn’s Nonprofit Board Forum)

One board member angrily complains that an letter improperly solicited the members of their organization. Accusatory emails shoot back and forth and the temperatures of the Board members and CEO begins to rise.  “This was the old way of handling problems,” one board member comments.  However, they had recently implemented a new way of governing and it was time for its first test.

In Policy Governance, there is a specific approach to addressing problems which prevents situations from spinning out of control.  Here is how this organization addressed the emerging problem and prevented a crisis.

The President and the CEO acknowledged it was a real issue.

Policy Governance creates a system by which the Board can control the organization without micromanaging.  Well thought-out systems are important, but a board is a human system comprised of people and their feelings.  By telling the aggrieved Board member that the problem is being taken seriously and is being addressed directly, they buy themselves time to deal with the issue in a meaningful way.  The challenge is to appropriately follow through so that the Board provides direction without usurping the CEO’s authority to run the organization.  That’s where Policy Governance comes in.

Has the Board Already Prohibited Such Action?

The Board had created a list of problematic situations that they wanted the CEO to avoid, such as treating their members unprofessionally, financially imperiling the organization, etc.  This list became the basis of the Board’s policies prohibiting the CEO from allowing these situations to transpire.

The President, the CEO, and the agitated Board member talked about what had actually happened .  There was no question that the CEO had the right to send a solicitation in the name of the organization.  There was also no expectation that the CEO needed to read the minds and sensitivities of Board members or individual members of the organization regarding sending out solicitations.  However, in their discussion, they revealed an area of sensitivity that the President and Board member thought the CEO needed to consider.  However, the President and the single Board member do not have the authority, by themselves, to tell the CEO what to do or how to do it.  Only the Board, as a whole, can do that.

The Board checked their policies to see if this particular situation regarding the solicitation of certain members had already been barred.  If it had, the CEO had some serious explaining to do.  In this case, the Board had not prohibited this type of action.

Fashion a Policy; Board Approves

The Board Chair, with input from several Board members and the CEO, created a policy that prohibited these kinds of situations in the future.  The President brought the policy to the Board which discussed and ultimately approved it.  The Board recognized that the CEO had the authority to take this action in the past, but they thought it was in the best interest of the organization as a whole to slightly limit the CEO’s authority in this one, narrow area.

Monitor, Monitor, Monitor

Then the Board directed the CEO to provide information at a future meeting that the policy is being followed.   This gave the aggrieved Board member even more confidence that her issues were being taken seriously and the needs of the members, whom she represents, were being well represented.  In Policy Governance, the Board monitor every one of its prohibitions each year, if not more, to ensure that the CEO is acting in accordance with the Board’s directions.

Strong Governance Systems Prevent Crises

Dealing with aggrieved members is a typical problem that can blow up into a serious crisis.  If the challenge is handled poorly, it can leave residues of hurt feelings and mistrust that undermine the strength of all of the leadership.  Policy Governance provides a coherent and robust system that clearly defines the roles of the Board and CEO and creates a roadmap for constructively addressing all governance circumstances.