History has taught us that the prerequisites of nonprofit board success—courageous leadership, bold direction, clear goals, and a systematic approach to implementation—can also provide a recipe for disaster. The reason? Decision-makers must make choices with far-reaching consequences based on assumptions about what that future will look like. Of course, this paradox has always existed—nothing new about an inability to prophesize about the future. But one thing has drastically complicated the landscape—the future arrives much more quickly now than it used to, and many of the guests it tows along are neither invited nor welcome.
Many nonprofit board members feel unsure about their ability to create a credible strategy to boost their own performance and to influence the performance of those working in the organization. Yet, the best plans to improve productivity come from pragmatic business leaders who willingly consider alternative futures for their organizations. This doesn’t happen automatically, however. Nonprofit board members must painstakingly address how to link mission to margins to create a stellar nonprofit board that capitalizes on the organization’s unique contribution.
It all starts with the organization’s mission—but it can’t end there. Before nonprofit board members influence leaders on strategy formulation, they should have a clear understanding of the mission of the organization and how to tie margins to it.
A mission statement should play the same role in an organization that the Holy Grail did in the Crusades. The mission defines the organization’s reason for being—the touchstone against which everyone evaluates strategy, activities, and expectations for overcoming the competition or making a unique contribution. Without one, members will diffuse resources, enable individual units of the organization to operate in silos, create conflicting tactics, and confuse customers, suppliers, financiers, and employees.
Conversely, when you have a well-articulated sense of purpose, you build a firm foundation that provides clear guidance for all significant decisions and establishes a point of reference for setting strategy and planning its execution. An effective mission statement answers these questions:
- Why do we exist?
- Who are our best customers?
- What do they expect of us?
- Who would miss us if we went away?
In addition to defining the organization’s identity, the mission guides its development over time. Although the mission should be resistant to capriciousness, as the external landscape changes, leaders must tweak the mission statement as they recognize how to translate purpose into practice—and how to take in enough money to keep the mission relevant and alive.
Most nonprofits don’t suffer because their board members don’t understand the organization’s mission. On the contrary, they miss the mark when they don’t figure out how to honor the mission while making money. I consistently repeat two mantras to my nonprofit clients: “No margins, no mission,” and “Nonprofit doesn’t mean not-for-money.”
Most nonprofit boards understand how to make what I call “Mission Income.” This money comes from the products and services the organization provides. For example, a nonprofit hospital board knows that reimbursement is key, and they may also understand how to generate income from non-hospital amenities, like coffee and gift shops. But too often they leave other revenue streams like grants, individual contributions, corporate gifts, and government funding untapped.
Board productivity requires that decision makers at all levels of the organizations have the financial acumen to know what to do with the money once they have it, too. But if nonprofit board members have overlooked these quantitative skills when they have recruited new members, the board will continue to struggle. Simply put, members need to know what the numbers mean, how to make sense of them, and how to use them to make sophisticated business decisions.
I have often said that on any board—public, private, or nonprofit—if you can sit on an audit committee, the organization will likely build a statue in your honor. If you can chair one, they will notify the Vatican of the miracle, and you will meet the requisite criteria for canonization. That’s not too much of an exaggeration.
In most cases, the real challenge for directors and executives in nonprofit organizations isn’t regulatory compliance or abandonment of the mission—it’s high performance. To achieve it, directors and executives need to systematically examine the five constructs of a successful, stellar board.
Nonprofit board productivity depends on strong leadership and tone at the top. Therefore, I recommend that the chair and CEO roles remain separate. Both directors and the CEO can be more effective when the roles and duties of the chair differ from those of the chief executive. Also, when different people have these roles, the chair can act as a lubricant between the board and senior leaders in the organization, especially when inevitable conflict occurs.
Nonprofit board success starts with the relationships between the directors and the CEO. The the CEO should regularly disagree with the board, and robust debate should occur, but never at the expense of good rapport. Embrace tension. Move beyond the outdated thinking that the board is a necessary evil and realize that a certain degree of tension is both healthy and desirable.
Contention, however, is not productive. The CEO should ask questions and question answers but all in a climate of candor and responsiveness. Trust, respect, and open communication form the foundation of any strong relationship; board relationships are no exception. Once the board has established rapport among themselves and with the leadership of the organization, everyone can focus on strategy.
Too often nonprofit board members don’t understand when and how they should be involved in strategy. Stellar nonprofit boards don’t formulate strategy, but they maintain a clear focus on it. They assess and critique it. Like the princess in the story about the pea, members need to detect flaws deep in the strategy—not to execute but to notice and report.
To safeguard the leadership pipeline, members will also want to influence succession planning—especially of C-suite positions. Members will certainly want to discuss the retirement plans for senior leaders plans, but they need to do more. They can play a more active role in setting criteria for hiring and promotion, identifying the stars in the organization, and creating opportunities to keep these people challenged and engaged. It’s all part of governance.
“Governance” is one of those all-encompassing words that people use but that few can explain in concrete terms. For nonprofit boards, it usually means general board oversight. Governance underpins the board’s ability to do all the aspects of its job. While strategy and succession planning address specific “What?” questions, governance deals with the “How?” It includes but is not limited to decisions about the board’s size, frequency of meetings, director selection, stakeholder relations, and social responsibility. When a board has a governance committee, those directors initiate action plans with specific timelines for implementation of recommendations. This committee should have the authority to shape and recommend policy and structure.
Why do nonprofit board members so frequently fail at linking missions and margins? As noted, it’s not because they don’t understand the mission. They do. Boards run into problems for one reason. Most people who serve on nonprofit boards have a clear passion for their organizations, but they lack strong financial acumen that would help them make the margins that would ensure the mission. The remedy? Set the strategy, define goals for moving the organization forward, and become more self-directed than grant-driven.