Editor’s note: This is the first in a three-part series presented in partnership with the Nonprofit Leadership Collaborative/SJC and United Way’s Nonprofit Capacity Building Program.
When people criticize local government, they’re usually referring to City Hall. But there’s another layer of governance that profoundly affects our county, and it gets relatively scant attention: the boards that govern nonprofits.
Nonprofits play a huge role across San Joaquin County, where more than 2,000 agencies, both large and small, employ over 21,000 part- and full-time staff. They contribute billions — yes, billions — to our local economy.
Boards of directors are essential to the governance of a nonprofit, as they control the missions, strategic direction and, ultimately, the financial stability and sustainability of an agency. A good board can bring infinite wisdom, lifting up an organization to become its best; a bad one can create a firestorm, killing the passion, vision and ability for a CEO to lead.
Traditionally, nonprofits have higher ratings for trust and credibility than for-profit companies, but bad boards can erode that trust with donors and the community.
Bad boards are more common than you think, but they aren’t necessarily managed by bad people. They might simply be misinformed, misdirected or, often, missing in action.
Research by the Stanford Graduate School of Business found that “too often, board members lack the skill set, depth of knowledge and engagement required to help their organizations succeed,” according to professor David F. Larcker, the lead researcher of the 2015 survey.
In researching this column, I heard plenty of cautionary tales.
In one example, a “narcissistic and demanding” strong-armed board chair had created a culture of hostility, triangulation and fragmentation. The chair was ultimately removed, but the remaining board and staff were left reeling — financially and emotionally. A board retreat was scheduled, with intervention as part of the agenda. The new CEO was able to redirect the team, bringing back his own leadership confidence, and the morale among the directors and staff was restored.
In another case, a board chair recruited both family and friends, offering paid support without having anyone sign conflict-of-interest forms. The chair was also the agency’s founder and managed in an old, no-rules tradition instead of transitioning toward strategic thinking and modern progress. This is politely referred to as “founder’s syndrome,” when the old guard tends to stick around longer than necessary, debilitating the existing board and staff. The nonprofit’s CEO ended up resigning in frustration. The founder then hired a new CEO, a close friend.
A good board can bring infinite wisdom, lifting up an organization to become its best; a bad one can create a firestorm, killing the passion, vision and ability for a CEO to lead.
When a board oversteps, bad stuff can happen. Boards should not have unchecked power. They shouldn’t have CEO-level control of operations, payroll, grant management or personnel.
This type of overreach forced one local nonprofit to close, but thanks to community intervention, it was able to merge with another. In another instance, the agency faced questionable financial practices, public humiliation and a pending legal investigation that led to front-page headlines.
Part of the work of a nonprofit leader is to remind the Board of Directors of its role. It’s an important and essential task. A good board leads in tandem with the CEO, is a strategic planner, a governance supporter, a door-opener for donors and funders. A CEO manages the operations of the business; the board manages strategy and CEO performance.
Grant funders — from local foundations to state and federal agencies — often want to know about the “robustness and health” of a board before donating to a nonprofit. They give credence to a strong alignment between the board and the CEO.
Building great boards takes time, but with thoughtfulness and strategic planning, a winning team is possible. Like professional sports draft picks, a board needs a solid process for selecting “champions.”
Don’t rely on nepotism or cronyism. Board chairs should first explore what the board needs before they start searching for members. For example: Does the board require someone who knows how to run a nonprofit? Or a legal expert? Someone with marketing savvy?
Nonprofit work involves more than just having your heart in the right place. It’s essential that businesspeople who are involved with, or who are thinking about becoming involved with nonprofit work, understand how the for-profit and nonprofit worlds differ. When board picks are strategic and thoughtfully oriented toward the mission of a specific organization, the result is a great starting lineup.
And don’t lean too heavily on a “blue chip” board, one that’s lined with mostly wealthy and influential people. Often armed with tremendous heart, this type of board can be hit or miss. The mix of a board should include diverse influencers, workers, sector experts and people with lived experience who can collectively set up a nonprofit for success.
In addition, think about term limits for board members. Many CEOs inherit boards. Surprisingly, many bylaws omit suggested term limits, meaning board members can stay on until the end of time. Being an effective leader requires cleansing the soul of a board with new blood. With the same pool of people year after year, a nonprofit can lose its fire for change, a CEO can lose their own ideas and innovation can lag.
Finally, the diversity of a board — in age, gender, ethnicity, expertise and geography (does your board have representation from each city in a county?) — is tantamount to long-term success. It will enable versatility and productivity. And the nonprofit’s staff should mirror its board’s diversity.
Just like an annual physical, conducting a yearly board examination should be on a nonprofit’s to-do list. When you have an unhealthy board, taking the temperature of your nonprofit can keep it well.
In most cases, the warning signs of a dysfunctional board are apparent, and even acting on preventable failures can take years to course-correct. The good news is, misguided missions can be reversed.
In the end, bad boards who systemically shift can turn into good boards. The domino effect is this: Good boards create good nonprofits, and good nonprofits create successful and healthy communities. But to build a good board, it takes fortitude, transparency and the diligence to change what needs to be changed.
But if you mind what matters, all is possible.
Kristen Birtwhistle is a multigenerational Stocktonian, president and CEO of United Way of San Joaquin County and founder of the Nonprofit Leadership Collaborative and the Nonprofit Capacity Building initiative. She spent three decades with Kaiser Permanente as a healthcare administrator and advocate for our community nonprofits.