In August 2020, a very large number of readers had their attention caught by my blog on the seven sins of nonprofit governance. It seemed that many people were interested in how governance can go wrong. Almost two years later, as Annual Meeting time approaches again, and new boards are elected, I want to revisit a question posed in my original blog: Could volunteer boards of directors be the Achilles’s heel, the fatal vulnerability, of non-profit organizations?
Unfortunately, yes. My original list of the “seven sins” of nonprofit governance showed how boards can indeed jeopardize an organization’s sustainability if they don’t do their job properly. I focused on the need for independent oversight and solid risk management. Boards can and should be assisted by external auditors and risk management experts (including cybersecurity experts). They should also be careful to spell out and to adhere to conflict-of-interest policies to ensure that personal interests of directors are not playing a role in decision-making.
Yet, as I reflect on my experience as a nonprofit director and I think more about how boards can get it wrong, I realize that measures to guarantee independent and objective oversight must be complemented by intangible aspects of culture and leadership. If those are missing, a nonprofit board won’t be effective in helping an organization achieve its purposes. Clarity, transparency and trust are fundamentally important to well-functioning boards.
Here is my updated list of seven nonprofit governance sins, taking these intangibles into account.
Boards need to find the right balance in their roles. Boards are part of the governance structure, but they are not the whole of it. They are not the only shapers or custodians of an organization’s strategy, finances or reputation nor should they assume managerial roles. Directors bring their ideas, skills, and networks to the table. They should reach out, share ideas, stay connected to the context within which their organizations work. But they share governance, they don’t monopolize it. Many boards have a written statement of their roles and areas of responsibility including the legal and fiduciary and the strategic and generative. They are clear about how decisions are made and by whom. Without this, they risk disarray.
The board needs to evaluate itself regularly. This provides important information to board members about their own effectiveness and gives them an opportunity to contribute to improve the effectiveness of the board overall. Without a regularized (at least annual) board evaluation, boards can drift off course and will lose directors.
The Chair and Vice-Chair of the board and the chairs of committees are the leadership of the Board. They need clear statements and a shared understanding of their roles. On many volunteer boards, the question of who becomes Chair or who takes on a committee lead is often a matter of who has enough time and is willing to put up their hand. But this shouldn’t be a matter of personal availability only. The responsibilities and qualities of leadership need to be spelled out for all to know. A succession process understood by all helps directors to feel included in the leadership election process. Without full board support and trust, a leader will fail, and directors may leave the table.
This has been one of the biggest questions and most glaring weaknesses of nonprofit boards. Over the last two years, there has been much more focus on the issue of diversity in all its forms. Boards need to pay attention not just to recruitment and numbers, but to how to build more inclusive cultures and to promote conversations that bring different assumptions and experiences to enrich their conversations. Without attention to this, boards will not be able to respond effectively to the changes taking place in our society, and the new risks that rapid change will pose.
Volunteer boards too often do not take the time to orient and educate their directors. Volunteers can come from many different sectors and while they care about the mission and purpose of the organization whose board they join, they may not be familiar with the culture, responsibilities, and expectations of their board. This shouldn’t be acquired simply through osmosis. Many new directors without orientation feel left out while they try to understand their roles and the context of the organization they are volunteering for. Without a solid orientation and ongoing education, organizations and their boards lose valuable time and talent.
This is a two-way street. It comes down to trust and transparency. From the board’s perspective, directors must be able to ask questions, obtain information and have debates with the organization’s leader without being perceived as intrusive or controlling. But the board must be willing to set clear strategic direction and hold a CEO accountable. If boards do not set expectations around performance and accountability, they are not supporting the CEO.
A good working relationship with the CEO, as stated above, is essential. It starts with recruitment. This is one of the most important decisions that a volunteer board makes, and as such the process of recruitment should be well structured, well supported and well managed. Boards must take the time to think through the qualities and criteria necessary to their recruitment of a new leader. Once chosen, a CEO should have the support they need from the board to take up their roles. Without this, a board is setting up its organization for failure.
For further reflection, I recommend the excellent ongoing work on Reimagining Governance by the Ontario Nonprofit Network and Ignite NPS. They have continued to develop and test their thinking on governance. One of their new resources (which could spark an interesting conversation at the board table) is Impacts on Governance Design, which describe eleven trends affecting the nonprofit sector today and how they converge to create six impacts on governance design.
Twenty years ago, in 2001, the federal government and the social good (then known as the voluntary) sector together negotiated and signed an Accord that set out the values, principles and commitments necessary for a stronger relationship. The objective of formalizing the relationship was to facilitate greater mutual understanding. To quote, the Accord “focuses on what unites the two sectors, honours the contributions of both, and respects their unique strengths and different ways of working. The Accord represents a public commitment to more open, transparent, consistent and collaborative ways of working together.” In a signed foreword, Prime Minister Jean Chretien stated that this Accord was “a blueprint for a strong and vibrant relationship between the Sector and the Government of Canada”.
The Accord remains a valid blueprint in 2021. But we have not been able to build the strong relationship for which this much desired Joint Accord gave us a solid design. Why not? For many reasons…changes in leadership, a loss of focus, a reluctance for advocacy, bureaucratic lack of imagination. But nothing that cannot be overcome.
I suggest that a key part of our sector’s agenda for 2021 must be to create a renewed, reinvigorated design for the 21st century relationship between the social good sector (the charitable and nonprofit sector) and the public (government) sector.
The social good sector is crucial to the achievement of many social and economic goals set by the federal government. We are active partners and contributors to the creation of a stronger and more resilient Canada post-pandemic. And we need recognition of our role as partners from the government.
Charities can be innovators and community builders on key files for the government such as responding to climate change, creating economic opportunity for youth and newcomers, fostering democratic inclusion and reconciling with Indigenous communities. We want to engage with government in building policy frameworks and structures that guide our relationship. But we lack a coherent horizontal policy framework across government to structure investments in service delivery, in talent, in technology and in data. There is no lead Minister with a mandate for the broader sector, no Cabinet-level Committee to develop the relationship with the sector as a whole.
The Senate Special Committee on the Charitable Sector in its 2019 report recommended (Rec.22) that the government create a secretariat on the charitable and nonprofit sector to convene interdepartmental work on issues affecting the regulation and relationship with the sector as well as to coordinate with provinces and territories. Imagine Canada released its case and policy brief for a cross-departmental “home in government” in November 2019. Most recently, Policy Options featured an excellent piece by Fateema Sayani of the Ottawa Community Foundation calling for the implementation of a centralized coordination body within the federal government.
The new government of British Columbia recognized the need for a political lead when it appointed a Parliamentary Secretary for Community Development and Nonprofits at the end of 2020. This was applauded by nonprofit leaders like Kevin McCort of the Vancouver Foundation who agreed that “dire challenges like the overdose crisis, racial injustice, and climate change demand greater collaboration between the province and nonprofits to harness existing know-how and foster innovation. This [appointment] will open up doors to new types of partnerships, mobilize new resources, and maximize our sector's potential to improve economic, social, and environmental outcomes.” Alison Brewin of Vantage Point noted that “the challenges facing our province today demand new solutions and fresh ideas. Charities and not-for-profits are proven innovators, fluent in collaboration with an ability to attract investment from outside government. We hope to see greater alignment with government planning and priorities to leverage these assets for the common good.” Surely what is true at a provincial level should be equally true at a federal level, even if the areas of jurisdiction are different.
Many voices across the sector in 2020 have called for a “home in government”. These calls will be louder in 2021. We may have seen a recognition of the need for cross-government coordination in the recent mandate letters sent to federal Ministers. The letter for Minister Ahmed Hussen, who has the Families, Children and Social Development portfolio, asked him to:
Continue to work across government to ensure that charities and nonprofits have the tools that they need to modernize as they emerge from the pandemic to support the Government’s overall agenda in a manner that responds to the needs of Canadians in every region.
Imagine Canada applauded this statement, noting that this was an “official signal of the Government’s commitment to sector policy needs.” Imagine went on to say that “we are hopeful that this is indicative of a readiness to engage in a strategic relationship with the country’s nonprofits and charities, at a time when partnership between these two key sectors is critical. We look forward to working with the Minister’s Office and Department to advance long-awaited reforms to our regulatory, legislative, and funding environment across government.” Indeed, let us hope that the door to a better relationship has started to crack open again in 2021. But the sector will have to keep its focus, rally its leadership and make this a priority federally if we are not to relive the slow weakening that we experienced post- 2001 Accord.