Filed under Board/Staff Relationship · Tagged: Board Governance, board oversight, Mission Statement, nonprofit board governance, policies, strategy
There are many definitions of Board Governance – most of which are broad and theoretical. But when I consult with boards who are interested in improving their ability to govern, I like to use a more practical definition that includes 6 key areas of focus. Additionally, I provide a few examples of actions or evidence that supports each of the six focus areas. This list, with its qualifiers, helps board members see how to work more effectively with their CEO and staff, and implement good board governance.
Below are the 6 focus areas of good board governance – and some examples of actions or evidence against which you can measure your ability to govern and lead.
1. Ensure that the organization is adhering to its mission.
a. There’s a crisp, clear one-sentence mission statement for the organization.
b. All projects that are not within the scope of this mission statement are eliminated.
c. If any potential funding or programs fall outside of the mission, they are discussed thoroughly and need to be approved by the board.
2. Approve and follow a strategy for the organization.
a. Be sure the organization has a strategy (a minimum of 3 years out).
b. Know how the organization is evolving and why.
c. Agree on the key milestones that are expected to be achieved and their due dates.
d. Debate thoroughly all funding, programs, or projects that fall outside of this strategy.
e. Any changes to the strategy require board approval.
3. Maintain a financially sound organization.
a. Establish an annual expense budget and an annual fundraising budget.
b. Ask the CEO to present the actual vs. budget (both expenses and fundraising) at every meeting – at last quarterly. Make sure the entire board understands these reports.
c. Create financial policies for the organization (cash handling, rainy-day funds, and investments) and be sure they are followed.
d. Hire an outside auditor annually.
4. Approve all policies and be sure they are being followed.
a. These minimum policies are in place: conflict of interest, ethics policy, values statements.
b. These organizational policies need to be approved by the entire board: Financial Policies, Human Resource Policies, Donor Policies, Operations Policies.
5. Inspire and manage the CEO.
a. Set up annual objectives (of accomplishments) for the CEO.
b. Make sure the Chair of the Board reviews the CEO annually. (written and verbal)
c. Insist on training and development for the CEO (and all staff members) each year.
d. Talk about the career path of the CEO each year – make sure you’re on track.
6. Create board sustainability.
a. Create meaningful committees that works closely with the staff and provides both oversight (governance) and organizational support.
b. For each board committee, create a brief, annual action plan for the work that will be achieved by that committee.
c. Know what skills are required on your board.
d. Create an annual system of recruitment and orientation that replenishes the skills of the board members whose terms are expiring at the end of each year.
e. Conduct a board self-evaluation annually.
f. Create a strong, supportive team that enjoys working together.
If your board meetings are not focused on the decisions required to govern properly, you should encourage your board to make some changes now. Not only is the board legally responsible to address these key areas of an organization, but it makes sense that the leaders of the organization focus their time and attention on these 6 key issues.
Send this article to your Board Chair today. Sit down and discuss how you can work together to create a board that governs wisely and thoroughly.
Filed under Board/Staff Relationship · Tagged: Board Governance, board management, board meetings, board self-evaluation
I just got off the phone with Camille Beatty Falor from StreamLink. Camille gave me a tour of their software, BoardMax, which has been developed for nonprofit boards. This software could help your organization’s board manage board expectations (giving, meeting attendance, time), board meetings (agendas, packets, voting summaries), and board committee work (rosters, meetings, actions, etc). It provides tracking and trending statistics and can graph this data for you. This software looks especially interesting for larger boards facing complex decisions and governance issues. For more information, go to: http://streamlinksoftware.com/products/board-management
Filed under Board/Staff Relationship · Tagged: Board Governance, MFI Board, Microfinance, Microfinance Institution Board
Unfortunately, many definitions of MFI (Microfinance Institution) Governance involve “all stakeholders” including: the board, staff, donors, lenders, equity partners, shareholders, clients, elected officials and even regulatory personnel. Defining Governance this broadly avoids a critical question: Who is ultimately responsible for making sure that an MFI is ethically and profitably managed? It’s the Boards of Directors.
The board provides oversight in these five key areas: (1) financial stability, (2) strategy, (3) organizational policies, (4) CEO management, and (5) board sustainability. The board guides the organization while the CEO and his/her staff ensure that products are well-designed, clients are treated ethically and legally, employees are well-managed, investments are sound, risks are managed, and the organization has a strong foundation on which to grow in a purposeful, strategic direction.
Here are some simple, but powerful, questions that all MFI boards should be asking themselves and their CEOs as they provide guidance and oversight:
1. Are we more interested in the quantity or quality of our loans? How is this reflected in our managerial policies, procedures, and personnel reward systems?
2. Are we reasonably sure that our loans are invested in businesses that our clients own and manage? What are the benefits of knowing how our loans are used? What are the costs? What are the risks of not thoroughly understanding our client’s financial needs?
3. What are we doing to ensure that our clients are not borrowing from multiple lenders? (If we’re doing nothing, how could we manage this more effectively? What would this cost?)
4. How do we assess the credit worthiness of individual new and existing clients? What are our procedures for assessing new and existing client risks? What training do we provide our employees to assess the creditworthiness of our clients?
5. What is our organization’s public position on the development of a credit bureau? How are we supporting that position?
6. What are our pricing policies? How often does this board review our product line and management practices to ensure that we follow these pricing policies?
7. What client protection policies have we adopted? How do we communicate these policies with our employees and with our clients? How do we make sure that our employees adhere to these standards?
8. How do we assess the risk of our growth? What percent of our future growth will come from (a) increasing loans to existing clients or (b) loans to new clients or (c) new products? How do we compare the risk of these three sources of growth?
9. What financial or other risks are embedded in this business? Should we create policies and develop procedures to manage these risks?
10. What risks (legal, regulatory, and political) are inherent in the microfinance sector of this country? How are we insuring against and managing these risks?
Don’t shy away from these difficult and possibly daunting questions.
If you are the CEO of an MFI, work with your staff and board committees to develop a point of view about each topic. Write policies and create procedures to manage these areas of your business. Seek board approval for your conclusions.
If you are on the board of an MFI, forward this article to the CEO and the Chairperson of the Board. Offer to work with the CEO, staff, and appropriate board committees to discuss these topics and develop policies and procedures for the organization. Seek approval from the entire board. By approving organizational policies and procedures, the board takes responsibility for the MFI and governance of the organization is where it needs to be.