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Who’s Got The D: Why Governance Matters for Nonprofits

According to Harvard Business Review, “decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed stems from a decision someone made-or failed to make. Yet in many firms, decisions routinely stall inside the organization-hurting the entire company’s performance.  The culprit?

According to Harvard Business Review, “decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed stems from a decision someone made-or failed to make. Yet in many firms, decisions routinely stall inside the organization-hurting the entire company’s performance.  The culprit? Ambiguity over who’s accountable for which decisions.”

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In this classic HBR article from 2006, Bain partners Paul Rogers and Marcia Blenko describe the RAPID Decision Model, instructing that for every decision, there are roles and responsibilities that must be assigned for who plays the part of Recommend, to gather the input and do the analysis to recommend a plan; who plays Agree, to negotiate and modify the proposal; who plays Perform, to execute the decision once it is set; who provides Input, to consider feasibility and implications; and who plays the role of Decide, ultimately committing the organization and being accountable.

In a nonprofit, the board of directors is the D for Decide.  The board makes the key organizational decisions regarding the direction, strategy, and revenue model of the organization.  The chief executive officer (sometimes referred to as president or executive director) and his or her team, should be the experts, and so they should play the roles for Recommend, Input, and Perform, and perhaps, Agree.  But only the board, based on discussion with the executive, can fully commit the organization; it is the board that has ultimate accountability. 

It is valuable for business people to know this for these reasons:

1.      For business people who are considering joining nonprofit boards, it is important to understand the role of the board.

2.      For for-profit consulting firms that traditionally work with for-profits and tend to work fairly exclusively with management rather than boards, it is important to understand that in the nonprofit sector, strengthening the board is essential if you are addressing the larger organizational matters of mission, vision, strategy, or revenue model.  Organizational consultants can only help elevate a nonprofit to its greatest potential by helping the board to understand its role, how to work collaboratively with the organization’s CEO, establish a useful board structure, build the board’s composition, plan for leadership succession, and function at the height of board effectiveness.

3.      When nonprofits are exploring organizational partnerships, much of the R and I work from the RAPID Decision Model can be done by the respective organizational staffs.  But the boards (or representatives of the boards – perhaps a task force, or leaders from each board) must be involved at key points in the negotiation, and certainly in the ultimate decision.

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4.      Business people who truly want to have an impact in helping to advance an important cause – if you have valuable business skills and some resources to contribute – consider joining a board. 

5.      For corporations and funders deciding where to invest contributions/philanthropy, it’s useful to look at who is on the board, assess whether there are board members who appear to bring business experience as well as people with “industry” expertise (from the field of work of the nonprofit itself) from diverse perspectives and backgrounds.  It’s also a good idea to look at the extent to which board members (and their companies, for those who come from the business sector) are supporting the nonprofit financially.  A nonprofit’s revenue model is always bolstered by philanthropic dollars to help support the organization’s important work.  If board members are not voting with their own wallets, why would an outsider invest?

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About the author

Korngold provides strategy consulting to global corporations on sustainability, facilitating corporate-nonprofit partnerships, and training and placing hundreds of business executives on NGO/nonprofit boards for 20+ years. She provides strategy and board governance consulting to NGO/nonprofit boards, foundations, and educational and healthcare institutions. Korngold's latest book is "A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot," published by Palgrave Macmillan for release on 1/7/14

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