Wednesday, March 19, 2014

Board competency 6: Accept fiduciary, accountability responsibilities

This is the sixth in a 10-part weekly series expanding upon the core nonprofit board competencies that I laid out in a recent post.

(Purchased from Bigstock Photo)

Core board competency 6: The capacity to understand and accept the fiduciary/accountability responsibilities of nonprofit governance.

On first glance, this one may seem very familiar. After all, several of the core "basic board responsibilities" focus on oversight and (too much of) the typical board agenda is spent scrutinizing budgets and profit and loss statements.

But the board's fiduciary/accountability responsibilities cover far more than financials. One of the greatest gifts of Chait, Ryan and Taylor's Governance as Leadership model is the articulation of the board's fiduciary mode as a broad-based function. (Also important: its equal value in the context of two other modes, strategic and fiduciary.)

When I present the GAL framework to nonprofit boards, I highlight the following fiduciary roles (drawing from Cathy Trower's excellent book, The Practitioner's Guide to Governance as Leadership):

Trower's "stewardship" descriptor of the fiduciary mode is critical to understanding our responsibilities in this area. Boards are charged with not only doing the math, but with active stewardship of the resources provided to the organization. Are they being used wisely? Are they being used to advance the mission? Are we focusing our energy on using all that we have on moving our mission forward?

What does the fiduciary mode look like in everyday governance practice? The following slide offers examples of several activities that offer a more expansive and realistic snapshot:

Note the strong accountability theme in the responsibilities represented. Also take note of that last bullet point. Problem identification is perhaps the most unique - and most ignored - fiduciary roles of the board. It's tied directly to our boundary-spanning responsibilities, and to our need to always be researching and learning on the job. Being in front of problems, rather than reacting to them, is a key difference between governance as leadership and simply taking up space around the boardroom table.

The capacity to ask the right kinds of questions is critical to fulfilling our fiduciary responsibilities. I'll close this post with a comparison Chait, Ryan and Taylor offered in the book that introduced the model to the world (Governance as Leadership, p. 38). The first list contains fiduciary oversight questions, the kinds that drive traditional board discussions. The second offers fiduciary inquiry questions, which take those discussions to a very different level. Do a direct "1 vs. 1," "2 vs. 2," etc., comparison of the two lists to bring the difference into focus.

Fiduciary Oversight Questions

  1. Can we afford it?
  2. Did we get a clean audit?
  3. Is the budget balanced?
  4. Should we increase departmental budgets by 2%-or 3%?
  5. Will the proposed program attract enough clients?
  6. Does a merge make financial sense?
  7. Is it legal?
  8. How much money do we need to raise?
  9. Can we secure the gift?
  10. Is staff turnover reasonable?

Fiduciary Inquiry Questions
  1. What is the opportunity cost?
  2. What can we learn from the audit?
  3. Does the budget reflect our priorities?
  4. Should we move resources from one program to another?
  5. How will the program advance our mission?
  6. Does a merger make mission sense?
  7. Is it ethical?
  8. What's the case for raising the money?
  9. How will the gift advance our mission? Does the donor expect too much control?
  10. Are we treating staff fairly and respectfully?

What can your board to do build its fiduciary muscles? What kinds of questions can you ask to drive different, higher-level conversations? How can your board move from straight fiduciary monitoring to fiduciary leadership?

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