Harvard Business School Working Knowledg e Archive

Why Nonprofits Have a Board Problem

4/4/2005
Plenty of distinguished people serve on nonprofit boards, but for some reason these directors shrink from leadership, argues Harvard professor Richard Chait. In this Q&A, Chait discusses his new book on how boards can transform into powerful forces of leadership.

Nonprofit boards are made up of the best and brightest—top business executives who are passionate about a cause, cultural icons, and dedicated philanthropists. With this caliber of people at the top of the governance structure, boards should be very influential in helping to lead the companies they govern. So why aren't they?

In Governance as Leadership: Reframing the Work of Nonprofit Boards, Harvard professor Richard Chait, along with coauthors William Ryan and Barbara Taylor, argue that boards spend too much time on minutia and management issues, and not enough time on big-picture strategy and leadership concerns.

Are nonprofit boards recruiting the wrong members? Are power-hungry CEOs stealing the spotlight? In this interview, Chait discusses why nonprofit boards are failing, and how they can transform into powerful forces of leadership.

Chait is a professor of higher education at the Harvard Graduate School of Education, and co-principal investigator of The Study of New Scholars.

Manda Salls: Your research shows a gap between leadership and governance—that they aren't written about or researched as related issues. Why is this?

Richard Chait: Historically few people considered trusteeship as related to leadership. In fact, all of the efforts were to separate and delineate the two. Leadership was seen to be the province of management and CEOs, governance and trusteeship the province of the board. We hope that we can enable people to see that the conceptual division along those lines is not very useful.

What boards and management are both concerned with some of the time is organizational leadership. These need to be joined together. We need to see governance as one source of leadership, and one set of leadership activities inside of an organization.

Q: Boards are generally made up of people who have performed at very high levels in their own organizations. Why don't these leadership skills translate to their work on a board?

A: They are leaders—that is what is so ironic! What's happened in some cases is that very talented leaders have recognized that there are differences between leadership and management, and that the greatest leverage resides with the exercise of leadership. So CEOs and VPs are often content to delegate some management functions to a board. Some CEOs have taken over leadership, and only left behind management, because the stakes of management are not as high.

Boards have become more regulatory, more compliance-based, more like a police officer than a member of a leadership team.

But there is another important reason. There has been a renewed emphasis on boards as fiduciaries—responsible for oversight, performance accountability, financial integrity, and conservation of assets. It has caused boards to focus more on this fiduciary or oversight role where they are the monitors of management, and less on their role as a partner in leadership. Boards have become more regulatory, more compliance-based, more like a police officer than a member of a leadership team.

Q: You introduce a mode of governance called "generative thinking." Can you give a brief overview of what this is, and why it is so essential to governance?

A: The most important work that takes place in an organization is when people first begin to identify and discern what the important challenges, problems, opportunities, and questions are. It's the way in which the intellectual agenda of the organization is constructed.

The generative work that we recommend encourages boards to be present at those times when the organization tries to make sense of circumstances, tries to make meaning of events.

The way in which we first make sense of circumstances is in fact what triggers or spawns strategies, policies, decisions, and actions. (We chose the word "generative" because its roots are in genesis.) Boards need to be there at the creation, when people say, "Okay—that's what we need to work on." Often, it's senior managers as leaders who come to a board and say, "We have looked at all the issues, here is the problem, here's what we plan to do. Does this solution sound right?" The question should be: "Do we have the problem right?"

When you think of a decision-making flow, all we are suggesting is that boards get at the headwaters. They need to get way upstream; they tend to wade in much too far downstream.

Generative thinking is getting to the question before the question. It's actually the fun part of governance. It's not about narrow technical expertise. Generative work is almost always about questions of values, beliefs, assumptions, and organizational cultures. That's what makes it interesting, but also what makes it important is to have people in those conversations who understand the institution, but have some degree of distance.

Q: Is there a fundamental difference between for-profit and nonprofit boards?

A: Yes. Among the big differences are:

  1. Corporate boards are almost without exception a collection of peers. The CEO is surrounded, basically, by other CEOs or people of equal station. On nonprofit boards that is not the case either in stature, in income, or in prestige.
  2. In still more than half of the cases in the corporate sector, the CEO is the chair of the board. That is never the case in the nonprofit sector.
  3. Corporate boards all know how to keep score. They know how to monitor performance, they know what metrics matter. In the nonprofit sector it is very hard to keep score. Are more souls saved in this church than the number saved fifteen years ago? Do we provide a better education at Harvard than we did ten years ago? The performance metrics are quite different.

Q: What should nonprofit boards be looking for when they recruit new members?

A: Nonprofits do not pay enough attention to the capacity of individual trustees to be effective members of the orchestra. They tend to look for talented musicians, so they get a lot of soloists.

Also, if you accept the idea that boards need to do generative work, then wealth alone is not sufficient. There are other kinds of assets that trustees need to bring to the table, such as intellectual capital, analytical skills, and social capital. What you are asking is not just to have this person buy or sell a point of view as a philanthropist. You want people who are comfortable with ambiguity, conflict, and group dynamics. This is a much different set of skills than someone who is affluent and therefore influential.

Q: Couldn't governance as leadership cause friction between boards and nonprofit executives?

A: They are a source of leadership, not the leader. One can apply a board's relationship to the CEO, the same dynamic that one would apply to any other source of leadership. There are absolutely CEOs and presidents of nonprofits who would prefer to have total control, to be the sole leader of the organization, to make all of the major decisions, and to do it unilaterally. For them there is a lot of friction. Happily, in my experience, that is a small fraction of nonprofit leaders. Most nonprofit leaders are pretty open-minded, comfortable with group process and consensus, and adaptable to multiple sources of leadership. They are saying if the board can help us see things in a new and better light, then that's great.

Nonprofits do not pay enough attention to the capacity of individual trustees to be effective members of the orchestra.

However, there are some nonprofit leaders who would prefer control to success. I think they are a minority, but they are there. We do get reactions from CEOs who are basically saying this is a recipe for all hell to break loose—"I'm out of control if you do this." If you are a control freak CEO, would you rather have the board decide on fixing the roof, or would you rather have them engaged in a conversation about the culture and ethos of the organization? I think you'd rather have them focused on the roof. So, yes, there is potential for friction, particularly with CEOs who are very focused on division of labor and lines of authority and control.

Q: What are some practical steps organizations can take to transform their boards? How can they start this process?

A: First, become familiar with the central concept of Governance as Leadership, that there are three different modes of governance: fiduciary, strategic, and generative, and all of these modes are important.

At a really practical level we suggest ways in which boards can diagnose their natural tendencies such as asking, "Are you more fiduciary than strategic?" and so on. It is a self study. Not so much of a performance per se. But does the board understand itself as a collective personality and does it understand how it functions?

We provide specific steps that boards can take to significantly increase the probability that generative issues will come into play, and that the board will be organized to reckon with those issues. There are steps to encourage what we call robust conversation, for boards to change the way they meet and discuss, and give them a much higher comfort level with disagreement. We also give steps to help boards become much more forensic in their thinking. They should understand what's gone on, not just what is going to happen. They need to be much more focused on making meaning of what has happened, and not just always asking what's next.

Q: What else are you working on?

A: I work in two areas: governance and academic management. We are actually in the middle of a national rollout of part of a program called COACHE: The Collaborative on Academic Careers in Higher Education.

We have developed a survey to assess the quality of work-life on college campuses, as experienced by junior faculty. I encourage anyone who is interested to contact me.

[ Buy this book ]

Manda Salls is the Web editor for Baker Library.

The Power of Generative Thinking in Organizations

by Richard P. Chait, William P. Ryan, and Barbara E. Taylor

Typically, we locate much of the power and opportunity to shape an institution in familiar organizational processes like mission setting, strategy development, and problem solving. Because they produce the purposes, strategies, and ideas that drive organizations, these are recognized as powerful processes. But a fourth process, of generative thinking, is actually more powerful. Generative thinking precedes these. More to the point, it generates the other processes.

To return to the paradigm shifts, imagine that a single nonprofit, rather than a loose network of police officers, researchers, and policy makers, first developed the strategy of community policing. It would be natural to credit the organization's strategy-development process for the new approach to fighting crime. But how could this really be? The organization would need the idea, if not the label, of community policing in order to arrive at the strategy and associated tactics. Strategy development helps an organization get from here to there, from the present point A to a future, preferred point B. But understanding point A—in this case, to conclude that the deployment of police was no longer a sufficient response to crime—must come first. And generative thinking produces a vision of point B—in this case, the idea of a different, preventive approach. Without generative thinking, we would have neither here nor there.

In fact, most of the formal planning and learning processes that appear so powerful in organizations look incomplete when one takes generative thinking into account. For example, businesses routinely invested in formal product-development processes to get an idea from the drawing board to the marketplace. The product development process was a series of engineering, manufacturing, and marketing activities. But then some product developers wondered if there was not more to the process. After all, how did ideas reach the drawing board in the first place? And what would increase the chances of developing good ideas to start with?1 In effect, the key question was, "What kind of generative thinking precedes product development?"

The same is true of organizational problem solving. Whether conducted through formal program development or informal trial-and-error, the important work of "problem framing" precedes problem solving.2 Before we solve a problem, we decide upon the nature of the problem. Similarly, the scientific method has value only after we find a hypothesis worth testing.3 Invariably, great research starts with great questions.

However compelling that logic may be, it has little influence on the way organizations usually work. In fact, judging from the amount of attention most of us give generative thinking, it is as if we believe that goals, missions, and problems simply appear in organizations, much as seventeenth-century Europeans believed that a jar full of old rags and wheat husks, left open for a few weeks, would spontaneously generate flies. It took nearly a century for people to speculate that flies might be depositing eggs into the jars. From there, a different understanding soon became obvious: An unseen biological process, not piles of rags and wheat husks, was generating new life. The same is true of organizations. A prior, unexamined cognitive process generates the moral commitments that missions codify, the goals that strategies advance, and the diagnoses that problem solving addresses.



Reprinted with permission from Governance as Leadership: Reframing the Work of Nonprofit Boards by Richard P. Chait, William P. Ryan, and Barbara E. Taylor, a publication of BoardSource, formerly the National Center for Nonprofit Boards. For more information about BoardSource, call 800-883-6262 or visit www.boardsource.org. John Wiley & Sons and BoardSource © 2005. Text may not be reproduced without written permission from BoardSource.




Footnotes:

1. Deschamps, J. P., and Nayak, P. R. (1995). Product Juggernauts: How Companies Mobilize to Generate a Stream of Market Winners. Boston: Harvard Business School Press.

2. Schon, D. A. (1983). The Reflective Practitioner: How Professionals Think in Action. London: Temple Smith.

3. Polanyi, M. (1974). Personal Knowledge. Chicago: University of Chicago Press.