Non Profit Management: Governance & Leadership - Research Paper Example

 Non Profit Management: Governance & Leadership Introduction: The concept of governance is embedded in the social science’s positivist tradition stating that individuals are allowed to choose among alternatives, depending on the consciously analyzed information. Such decisions then predict particular behaviors, and the outcome of these behaviors lead way to alterations in future decisions (Burrell & Morgan, 1979). Non profit governance refers to the strategic leadership within the organization. Most significant aspects of leadership include setting the strategic decisions and analyzing past performance of the organization. Considering governance in the context of decision making, dominant issues that are highly debated among scholars are who plays or should play the major role in practice? Who is to be held accountable and how governance decisions are to be constructed? (Ott, 2001, p.9) Governance of non-profit organizations have been often regarded problematic, especially by the staff members who are seldom satisfied by the board’s performance. Boards have been targeted for either meddling a lot in the management affairs or becoming altogether ignorant. A number of failures in governance, in recent years, question the effectiveness of governing strategies in non-profit organization (Gibelman & Gelman, 2000). This paper elucidates the diversified structures of boards, and other processes that influence board’s governing performance. Review: To examine the influential factors affecting board’s effectiveness, Cornforth (2001) stated the account of a national survey on charity boards in Wales and England in 1999. Findings revealed a mixed response for normative literature, highlighting certain variables that are significant for the effective performance. These factors include board members who have the expertise and time to do the job, conceptual clarity of board’s roles and responsibilities and that the board, together with the management, seeks a common vision to accomplish organization’s goals by reviewing their performance on periodical basis. Herman (1989) provided a summary of the widely acclaimed standings of board processes encompassing the up surging need to systematically analyze board composition, training new members of the board, devising new methods for board recruitment, performance appraisal at regular intervals and member’s commitment to time etc. He also mentioned the board’s major functions that are still applicable. After a definite period, his summary faced criticism for being unrealistic, due to the fact that there exist a wide gap between the reality of boards and the prescriptions suggested. Thus, his summary began to lose motivational factor. Jackson and Holland (1998) objected Herman’s model as being centered on subjective individual experience lacking any systematic empirical evidence (p.159-60). Apart from these concerns relevant to governance, literature on the decision making involves normative and analytic schools of thought (Ott, 2001, p.13). Normative approach to making decisions in strategic management is that it is a rational process, based on the best possible information gathered from varied sources. It encompasses setting objectives, keeping in mind the organizations’ current position and future prospects. A kind of strategic plan is developed that is to be followed for a specified time and reviewed on annual basis for making any changes as the situation demands (Ott, 2001, p.12). Normative comprise of all final decisions be made by the non-profit organization’s board of directors, trustees or governors. They are the leading body to whom other organizational members are accountable. Analytic approach for decision making focuses on the connections that exist while making strategic decisions for the organization. It helps to highlight the roles played by various members in formulating decision e.g. Jay Galbraith (1983) has mentioned three distinctive roles in administrative decision making. This involves the ones who make decisions, those who influence these decisions and lastly those who ratify them. In most of the non-profit organizations, chief executive officers are prime decision makers. Board usually approve their ideas, but sometimes any decision could be vetoed and reverted back for reconsideration to the CEO (Ott, 2001, p.11). Formation of a board of directors is another requirement for the non-profit organization’s governance. The board that governs should be morally and legally liable for accomplishing organization’s missions. The size of the board is incumbent upon the needs of the organization e.g. if the board is restricted to formulating policies, then a small board would be appropriate for their implementation. But if there are persisting issues like wide scale fund raising programs, then board should comprise of many members. Board members’ total number is determined on the basis of bylaws that also indicate their fixed terms of office and election process. Some boards allow their members to serve for indefinite periods while others limit the number to give way for fresh members. Governance committee exists in many organizations whose function is recommending new board members to the full board (Grobman, 2004, p.93). The organizational officers elected usually include Chairperson or President, Vice President, Secretary and Treasurer (Grobman, 2004, p.94). Being a board member implies meeting certain standards set by the non-profit corporation law, usually including the duty of care, loyalty and that of obedience. He must be faithful to the organizational missions in whatever decision he takes (BoardSource, 2003). Responsibilities may include attending board meetings regularly, active participation in funding and serving at least one standing committee (Grobman, 2004, p.95). Defining salary packages and job description for other staff members, formulating budgets and spending reports, submitting applications for funds, planning for improving organization’s effectiveness, and giving advice to the executive director for policy implementation are all done by the board (Grobman, 2004, p.96-97). Non-profit boards are responsible for creating and reviewing the mission statement that articulates organizational aims. They select a chief executive who is morally and professionally sound. They ensure effective planning and financial resources and work collaboratively to enhance the public standing of organization (BoardSource, 2009). The first document concerned with the trustees, is the main charter of organization often called “articles of incorporation”. Such articles are drafted with the assistance of an attorney at the time when the organization petitions a corporate status from the state, while being reviewed in the state office having corporate records. Once approved by the state, trustees are liable to ensure that the organization is abiding by the rule and regulations set in the charter (Wolf, 1999, p.49). “By laws” is the second document drafted by the Board of trustees serving the operating constitution of the non-profit organization. They are more specific in setting out the tenure, election procedures, number of members to be appointed and how meetings are to be called, votes to be casted, board vacancies be filled within an organization etc.. It is mandatory to review and update bylaws periodically, to ensure that all provisions being followed are legally approved (Wolf, 1999, p.50). Although members of the nonprofit organizations are not likely to be sued, but the risk factor is always there. Excessive financial loss, related to a lawsuit against board members, could adversely affect the entire structure of organization. Therefore, most organizations get a “director’s and officer’s liability insurance” whose cost is dependent on the nature of organization’s work. Indemnification, outlined in the bylaws of the organization, is the term that is used to ensure that organization has enough funds to pay all liability charges against its members of the board. State law sometimes compel this practice, however, it cannot be validated if the charges are raised by staff members within the organization (Ott, 2001, p.20-21). The most common pattern observed in the governing body of non-profit organizations is the “CEO dominant pattern”. Other volunteer driven, smaller organizations have “Board dominant pattern”. Professional bureaucracies like universities and hospitals, where a senior doctor or faculty member make prime decisions that are readily agreed by the board and CEO, are called the “staff dominant pattern” (Ott, 2001, p.11). In the end, there comes the collective governance, commonly observed in non-profits having strong self help or other advocacy goals, where a consensus among all stake holders exists giving those equal rights to make a decision by active coalition between staff of all levels, board, volunteers etc (Ott, 2001, p.11). Executive limitation in the governing policies is the restraint in the authority of executives at a certain level. Common types of executive limitation include certain boundaries on asset protection, treatment of parents, budgeting, indebtedness, compensations and benefits, growth and financial condition. Executive limitations are directed from the board to the CEO, thus limiting his powers in policy implementation (Ott, 2001, p.31). Linda C. Crompton, CEO of the “Board Source” reveals that as the board is the prime entity accountable for supervising organizational tasks and good governance is the operating mechanism for designing policies for the future, the board must convert itself to bring a transformation within the organization. Transformative governance means applicability of innovative ways of thinking to the already existing principles of governance, and further broadening definition of governance by including leadership elements that is just one aspect of the management, not the end within itself (BoardSource, 2010). Reflection: While reviewing literature related to governance, it became evident that the failure to govern properly is due to two valid reasons. One being extra allowance paid to the top executives of the organization to make governing decisions and the other due to trustees who can’t comprehend the difference between day-to-day micromanagement tasks and high strategic tasks, thus getting too much engrossed in daily activities that no one is left to handle the big picture. By relating both normative and analytic literature, it becomes evident that there is no firm pattern for decision making in governance. Although the primary role of the board of directors is considered morally and legally desirable for strategic management, it does not guarantee a successful outcome for the non-profit organization (Ott, 2001, p.27). However, if the board manages to resolve governing issues, by devising policies rather than directly getting involved in every aspect of staff activity, then ethical governance could be achieved (Ott, 2001, 28). Board decisions forwarded to the staff members are general rather than specific thus saving the board’s precious time in making separate countless decisions. They just direct what should be the outcome, and what is not to be done. The rest is handled by the lower levels of management (Ott, 2001, p.28). Waterman (1988, p.7) stated that leaders define boundaries and their staff figure out the best possible way to accomplish the tasks assigned within these limits. Boards normally struggle with issues comprising of budgets, staff allocation, purchasing equipment, compensations etc (Ott, 2001, 25). Most non-profits are having difficulties in hiring the best Board members because of the reason that upwardly mobile professionals are frequently repositioned. An executive director is hired by the board based on his performance appraisal. For having the most suitable choice, nominating committee hold several meeting within an year’s time, judging individuals on the basis of their level of expertise in fundraising, legal awareness or managerial abilities, age, race and ethnic background (Grobman, 2004, p.94-95). In addition, trustees of non-profit organizations are also responsible for planning broadly stated goals and particular objectives e.g. if the goal of a community centre is to provide a large variety of sports facilities for the special school children, the objective may be providing physical activities every one hour on weekly basis to 850 children, eight to eighteen years of age, belonging from a low economic background (Wolf, 1999, p.52-53). The implementation of these objectives are carried out by the staff and reviewed by the board. Afterwards, the trustees evaluate the effectiveness of proceedings. Major alterations in strategy can occur but at irregular intervals. Therefore, if organizations stick to a set policy rule, a revolution is likely to occur, formulating a new strategy itself (Miller & Friesen, 1984). According to me, benefits associated with a formal strategic plan are that it involves consultation with the internal and external stakeholders who do not directly influence decisions within the organization and involves obtaining pertinent information about the environment. This help to develop strong relationships with external groups and enhance staff commitment to work, thus solving inter-organizational issues (Bradshaw, Murray and Wolpin, 1992). Conclusion: Assessing the process of non-profit governance is of higher significance but is suffering due to normative writer’s wishful thinking, without considering what is needed to be done at present. Governance will improve if there is a better understanding of the current processes and influential factors. But until then the sector is preoccupied by successive fads, yielding best supposed answer to the problem (Ott, 2001, p.13). Recommendations offered by the normative style governance for managing non-profit organizations include that the governing board should be the only primary body knowing the strengths and weaknesses of the organization to adapt to the changing environments. All governing board members must be thoroughly selected and trained by the board itself, to remove the rubber stamp stereotype commonly associated with managing body. Bibliography Bradshaw, Pat, Vic Murray & Jacob Wolpin (1992).”Do non profit Boards Make a Difference?” Non-profit and Voluntary Sector Quarterly, 21(3):227-250. Cornforth, C. (2001). What Makes Boards Effective? An examination of the relationships between board inputs, structures, processes and effectiveness in nonprofit organizations. Corporate Governance. An International Review Vol. 9 (3): 217-227. Blackwell Publishers Ltd. Crompton (2010). Transformative governance: The new future of governance. BoardSource Retrieved at: http://www.transformativegovernance.org/mainInfo.php Galbraith Jay (1983). Designing complex organizations. Reading MA: Addison-Wesley. Gibelman, M., & Gelman, S.R. (2000). Very Public scandals: an analysis of how and why nongovernmental organizations get in trouble. A paper presented at the International society for Third Sector Research Conference, Trinity College, Dublin. Grobman G.M. (2004).An Introduction to the Nonprofit Sector: A Practical Approach for the Twenty-First Century. 2nd Edition. Harrisburg, Pennsylvania. White Hat Communications. Herman, R.D. & Jon, V.T. (1989) Non profit Boards of Directors: Analyses and Applications, New Brunswick, NJ: Transaction Publishers Hopkins, B.R. (2003).Legal Responsibilities of Nonprofit Boards. BoardSource Ingram, R.T. (2009).Ten Basic Responsibilities of Nonprofit Boards, 2ndEdition. BoardSource Jackson, D.K. & Holland, T.P. (1998). Measuring the effectiveness of non profit boards. Nonprofit and Voluntary Sector Quarterly, 27(2):159-182 Miller, D., & Frieson, P.H. (1984). Organizations: A Quantum View. Englewood Cliffs NJ: Prentice Hall Ott, J.S. (2001). Understanding Non-profit Organizations. Governance, Leadership and Manegement. Westview Press. Waterman, R.H.(1988). The Renewal Factor: How the best get and keep the competitive edge. New York, Bantum books. Wolf, T. (1999). Managing a Nonprofit Organization in the Twenty-First Century. 3rd edition. Free Press. Read More