Governance can be defined as: The combination of policies, systems, structures and strategic framework which a governing body puts into place to ensure that the leadership of an organization makes appropriate decisions.
Or, in less fancy, layman’s terms: Overseeing the control and direction of an organization. Governance models refer to how the authority chain and framework interconnect. These models ensure decision-making remains effective and that correct accountability is assigned to board members and/or managers of an organization.
With more competition than ever in the workplace, both nonprofit and for-profit organizations consistently find themselves faced with challenges as they seek to maintain success and stay on course. Deciding on a particular governance model can be a challenge in itself, as each organization is unique. There is no right or wrong governance model; at some point, every organization must decide which one fits them best. Many organizations adopt a combination of various board governance models that often evolves with time. When organizations face a new life cycle or phase, when operations become unstructured, when roles become ambiguous and board members dissatisfied with their roles, or when a CEO, a college president, a church’s senior pastor, or several board members leave, it may be time to reevaluate one’s governance model.
Adopting a new board governance model might seem daunting. But it needn’t be. Changing models is a bit like changing one’s lifestyle. Let’s say that someone has spent the past few years eating cheeseburgers and Fritos and watching Seinfeld reruns from the comfort of their couch every night. One day, they wake up and realize they’d like to change their life, get healthy, swap the burgers for green smoothies and the reruns for time at the gym, working on their fitness. They might feel eager, but understandably a bit overwhelmed. Where to begin? Which way to go first? This is a bit like that. Changing governance models entails abandoning well-established ideas and replacing them with new ideas and roles. This change takes time, energy, resources and resolve. It may feel confusing at first. But over time, clarity and greater ease does come. With the right model in place, any organization can succeed.
Let’s take a look at the five most common board governance models for nonprofit organizations.
Advisory Board Governance Model
Many nonprofit organizations choose to use the Advisory Board Governance Model. An advisory board is the platform that an organization’s president or CEO consults for assistance or advice. The president or CEO may carefully choose a team of trusted individuals as part of this board. Each board member possesses a set of professional skills and unique talents that will be useful to the nonprofit, and in most cases, they provide these valued skills at no charge. A quality advisory board can boost the reputation and credibility of a nonprofit. This is an excellent model for nonprofits concerned with achieving high fundraising and public relations goals. The advisory board may serve as the main governing board of a nonprofit, or the organization could utilize additional models that offer special expertise, such as a young professional advisory board. This model is often appealing to board members, because these younger members bring valuable contributions to the table, and meetings tend to be informal and task-oriented. While this model can initially be effective, challenges arise when board members face liability issues because accountability mechanisms become ambiguous. This model is not limited to nonprofit organizations. The Advisory Board Governance Model can be the first step in governance for small but growing for-profit organizations. It is an effective way to introduce new ideas from leading experts in variety of career fields.
Patron Governance Model
The Patron Governance Model looks very similar to the Advisory Board Model. However, it includes a few distinguishing factors. With the Patron Governance Model, boards comprise individuals who either possess a great deal of personal wealth or wield significant influence in the nonprofit’s field. The primary duty of this board is fundraising. Board members may contribute their own funds to the organization, or they might reach out to members of their network to contribute as well. Generally, under the Patron Governance Model, board members in this model have less influence over the president or CEO than with the Advisory Board Model, other than running the risk of losing funding. This model can be very helpful, but the board cannot be relied upon for governance tasks, like vision development and organizational planning.
Cooperative Governance Model
Many nonprofit organizations do not have an official president or CEO. In this case, the Cooperative Governance Model works well. Under this model, the board makes decisions for the nonprofit as a group of equals. This is a highly democratic model, as no board member has a higher standing or more power than another. This model is often used when the law requires a nonprofit to have a board of directors; it works best when each board member is able to show an equal amount of commitment to the organization. Challenges may arise, however, when personal morale declines. Under this model, there is no effective way to ensure accountability for individual actions.
Management Team Governance Model
The Management Team Model is one of the most commonly used governance models. With this model, the nonprofit acts similarly to a for-profit corporation. Instead of hiring people or teams to handle human resources, financing, fundraising and public relations, the board forms itself into committees to do these things itself. This model, which rose in popularity in the 1970s and has continued to gain momentum, is often used by volunteer organizations such as home school associations, Girl and Boy Scouts and other hobby groups. Challenges under this model arise when board members refuse to delegate authority and become micro-managers instead, resulting in inconsistent decision making and resentment and discontent among staff.
Policy Board Governance Model
The fifth common board governance model is the Policy Board Model, also referred to as the John Carver Policy Governance model. This model was developed by John Carver, author of Boards That Make a Difference. Carver, an esteemed psychologist who has co-authored five books and worked as a business officer in small manufacturing, understands both the business and psychology ends of organizations. He trademarked the Policy Governance model and has consulted with businesses in nearly 20 countries. Under his model, the board delegates much of their trust and confidence in operating the group to the CEO or president, and the CEO holds regular meetings with the board to update them on the nonprofit’s activities. With the John Carver model, there are very few, if any, standing committees on the board. Typically, the board is secondary to the CEO in overall power. The CEO is responsible for the staff, and the board typically does not interact with staff. However, the board and CEO work together as a team, meshing their skills and ideas. Members are often recruited because they have demonstrated commitment to the values and mission of the organization. Many nonprofits use this model, often combining it with other models to create a more specialized advisory team.
As with nonprofit organizations, for-profit (corporate) organizations use five common board governance models. The Traditional (Structural) Model is the oldest of the models, its use dating back to as early as the 1700s, when corporate structuring began. Many government organizations still use this model, as do many law firms. This model is built upon the concept that the board is the legal ownership entity and speaks as a board, while members of the board speak on behalf of the board but do not have an individual voice outside of the organization. The Board Chair is usually structured to be the official “voice” of the board, but only speaks in a way authorized by the board as a whole. Under this model, the board usually delegates responsibilities to the CEO or the board committee.
While the Traditional Model can be effective, it is no longer as widely used and presents some unique challenges. When the board delegates its powers, accountability and expectations sometimes become muddled. Another challenge arises when the CEO creates management operating committees that overlap with board committees which hold similar responsibilities. This can lead to confusion among staff about their roles, as board members cross boundaries between governance and operational management. Organizations still using this model have recently reduced the size of the board and sought board members capable of governing as a whole, versus merely representing constituents.
The Carver Board Governance Model, common among nonprofit organizations, is also popular among corporate organizations. In the words of John Carver, who, again, popularized the model over the past 20 years, this model is a “rigorous academic approach to a practice area that has had very little research over the years.” The Carver Model addresses two fundamental concerns: the board defining the organization’s goals, and creating policies by which the board and management team must abide. The board’s prominent role is to create policy to guide management and also guide the board in its governance work. John Carver suggests that, under this model, a competent board chair member should have the freedom to take action in the area of governance.
Challenges in this governance model arise when the board focuses its time on building policy rather than actually attending to other pressing responsibilities. While creating policy (such as how many meetings to implement a year) is helpful to create structure, and can potentially protect the board and organization, this model doesn’t always help to establish clear expectations or ways to measure success. This model works best when an organization looks beyond policy and creates a comprehensive strategic business plan and budget.
Every great organization creates and implements a strategic plan that aligns with their Board of Directors’ vision for the future. Learn more about IHN HR’s Strategic Planning Processes here:
Less Common Board Governance Models
The Cortex Board Governance Model
Under the Cortex Board Governance Model, developed by John Por of Toronto, the board focuses on clients, community, legislation and best practices of similar organizations, so they can define the standards they wish to adhere to in their own organization. The board’s main role under this model is to clarify and set outcomes, so they can measure success. The board may set up an accountability framework, identifying which roles the board, CEO, staff or other members should assume. This model helps ensure transparency and accountability, as it helps organizations establish clear outcomes and measurements of success. Challenges with this model arise, however, when board members don’t fully understand the business and must rely on the management team to do much of the research. This model can also be tricky when organizations do not implement mechanisms or report structures to measure performance against new outcomes. However, these things can be developed over time. Focusing on what is important, versus what is convenient, is key for organizations that use this model.
The Consensus Model, alternatively known as the Process Model, stems from the idea that all board members are equal, with an equal vote, responsibility accountability and liability for decision making. This model recognizes, however, that board members offer different areas of expertise, knowledge and wisdom. Under this model, board members must decide how issues will be discussed, how differences of opinion will be handled, and how members will reach a consensus on timeliness and agenda management. Many small, family-owned businesses or corporations with no shareholders use this governance model. Challenges arise when roles remain undefined, necessitating that issues must be sorted out among the CEO and board members. When disagreements arise under this model, board members often turn to Robert’s Rules of Order or the Parliamentary Rules of Order for guidance.
Competency Board Governance Model
The Competency Board Governance Model, sometimes referred to as the Skills/Practices Model, is also used in organizations. This model focuses on development, and ensures that all board members possess appropriate knowledge and skills. Relationships remain a key factor under this model, with special focus on communications and trust. Board members are often assessed to ensure their behavior matches the expectations of the organization, and that they work well together, as a team. While this model is very appealing for many organizations because of its relationship-driven quality, it can run into challenges when clear policy is not implemented. Having an experienced board member mentor newer board members can be an effective strategy.
If this information is new to you, or feels overwhelming, please don’t let it be! Choosing the best board governance model for your nonprofit or for-profit organization doesn’t have to be like pulling teeth. Your organization is unique and one of a kind. Therefore, your model will be as well.
Here are some questions to consider when reevaluating your governance model or establishing one for the first time:
- Do we have a clear understanding of the purpose of our organization?
- What are our organization’s basic values?
- How do we measure our organization’s success?
- What are our financial resources, and will these resources be reliable for the next several years?
- Do we believe our organization should be run as a cooperative, or a collective? In other words, should staff participate with board members in the governing?
- How much time is each board member wiling to devote to the organization?
- What is our expectation for board member meeting attendance and commitment?
- How will we hold board members accountable?
- How useful is each committee we have? Could we eliminate any?
- How will we handle disagreement?
- How much trust does the board place in the CEO or president?
- How satisfied are our current members with board performance?
- As board members, to whom do we wish to be accountable?
In the words of John Carver, “A carefully crafted, conceptually rigorous purpose of governance … forms the heart of board effectiveness.”
What is the heartbeat of your organization? What really makes you tick? Remember, it need not be a one size fits all. Your organization is unique, complete with a distinct purpose, vision, skillset and team. Take some time today to ponder which one of these board governance models might work best for you.
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